At the same time, the engineering contractor noted that the collapse in crude oil prices has been a catalyst for its oil and gas clients to review their future investment plans, therefore reducing demand for Petrofac’s services.
Tenders for work have been delayed and recently a key US$1.5bn contract was terminated.
The majority of this year’s tenders are now expected to be delayed into 2021. Petrofac meanwhile said that contract extensions have been stronger, with US$500mln secured to date.
It is now taking further steps to cut costs, over those announced in early April, seeking to reduce overhead by at least US$125mln in 2020 and up to US$200mln in 2021.
The company noted that the suspension of the final 2020 dividend, previously announced, and a 40% reduction in capex is expected to conserve some US$145mln.
Chairman Ayman Asfari, in a statement ahead of today’s AGM, told investors that the company continues to make tough decisions which put the contractor in the best position to weather the disruptions caused by the coronavirus (COVID-19) pandemic.
“We are working hard to mitigate the disruption caused by COVID-19 on project progress and lower oil prices on our bidding pipeline. And we have taken swift and decisive action to significantly reduce costs, retain our competitiveness and preserve the strength of our balance sheet,” he said.
Petrofac told investors that it remains unclear how long the COVID-19 impacts and low oil prices will continue, but, it retains a strong balance sheet with US$1.2bn of liquidity.
It highlighted a ‘capital light’ business model and a strong competitive position in the Middle East, where low cost production is expected to provide some protection against the near-term headwinds.