LONDON – In wake of the weak oil prices, Ensco has taken additional steps to improve efficiencies and reduce expenses.
It has decreased its global operations reporting structure from five to three business units. Additionally, it has increased offshore unit labor cost savings to 15% (full run rate to begin 1Q 2016) from a previous estimate of 9% reported in February 2015. The company will also look to further reduce average warm-stack costs per day for marketed rigs: $40,000 for drillships, $32,000 for semisubmersibles, and $20,000 for jackups.
Based on these actions, Ensco said that its expense outlook has improved. Excluding severance costs and related expenses of approximately $5 million, 3Q 2015 contract drilling expense is estimated to be $450 million-$455 million.
The initial contract drilling expense outlook for 4Q 2015 is approximately $435 million-$440 million. The projected quarter-to-quarter sequential decrease in contract drilling expense is due to proactive expense management that more than offsets an estimated increase in rig operating days. The final quarter of 2015 reported fleet utilization is estimated to increase from 3Q 2015 to the high-60% range and will benefit from ENSCO DS-8 commencing its initial contract in mid-November 2015.
CEO and President Carl Trowell said, “We recently streamlined our global operations reporting structure and have taken additional steps to reduce expenses. In total, the actions we have taken year to date to reduce onshore support positions will generate a combined savings of $57 million on an annual basis. Steps taken to adjust discretionary compensation plans will reduce offshore unit labor costs by a total of 15% compared to 2014 levels.”
The market downturn has impacted two regions: Brazil and Asia/Pacific, Ensco said. As a result, the company has consolidated its global operations reporting structure from five business units to three. Brazil will report to the North & South America Business Unit based in Houston. Asia/Pacific will report to the Middle East, Africa, Asia & Pacific Business Unit based in Dubai. Europe and the Mediterranean Business Unit is unchanged and continues to be based in Aberdeen.
In conjunction with this business unit restructuring, the company further reduced onshore positions and centralized certain support functions.
The company is the latest among many to announce further cost-cutting procedures, with multiple companies announcing job cuts last week.