McDermott International Inc. (MDR) has shed about 1,675 positions, mainly craft labor jobs at its fabrication yards, the Houston-based company said May 11 in a release about its first-quarter 2015 results.
The job losses come as the oil and gas industry continues to cut expenses amid lower oil prices, which have shown signs of a rebound in recent weeks.
The company, which specializes in engineering, procurement, construction and installation (EPCI) with projects in the U.S. Gulf of Mexico, said a 475-position employee count reduction through the end of March is expected to result in a 2015 cash savings of $27.6 million.
The news came after the company announced a plan aimed at “driving improvements in profitability and flexibility through reducing fixed and variable costs.” Among the key components of the plan, as stated in the news release, were centralizing front- and back-office functions, increasing organizational efficiency and outsourcing some noncore business activities.
“Restructuring charges for the quarter were $10.4 million, as part of the company’s previous guidance of$25 million to $35 million for the full year 2015,” the Business Wire news release stated. “McDermott remains on track to achieve the expected annual cash savings of $50 million in 2015, before restructuring charges.”
McDermott reported a net loss of $14.5 million for first-quarter 2015, compared to a $46.5 million net loss in the prior-year quarter.
Despite the losses, McDermott President and CEO David Dickson pointed out that the company is landing new projects.
“While the macro industry environment continues to be challenging, McDermott has received three new brownfield EPCI projects in the Middle East, the Marjan Power Supply System from Saudi ARAMCO, the Qatar Petroleum award for a wellhead jacket and deck, as well as a new platform and two bridges from Al-Khafji Joint Operations,” Dickson said. “As one of our core markets, these new awards reinforce the ongoing activity in the region.”
McDermott also has won contracts for projects in the Americas and offshore Brazil, he added.
“Although we encountered the weather seasonality we anticipated during the quarter, we are committed to executing our backlog safely and efficiently,” Dickson said. “We also remain focused on prioritizing our bidding activities on opportunities where we have competitive differentiators to win new awards.”
As of March 31, 2015, McDermott’s backlog totaled about $3.75 billion, about half of which was related to offshore operations. The other half was related to subsea operations, according to the release.
The job cuts are among several announcements made by oil and gas companies this year as they work to salvage budgets hit by lower oil prices. In April, Weatherford International Plc (WFT) said it would eliminate 10,000 jobs worldwide, instead of the previously announced 8,000, mainly in North America.
Baker Hughes Inc. (BHI) has announced plans to lay off about 7,000 people in first-quarter 2015. On April 21, Baker Hughes CEO Martin Craighead said the company would cut another 3,500 positions, while Schlumberger Ltd. (SLB) said in April that its staff reductions would total 20,000 since the beginning of the year.
During first-quarter 2015, Baker Hughes reduced costs in response to the faltering market by closing or consolidating about 140 facilities worldwide. The company also idled or impaired excess assets and inventory.
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