While Esbjerg, Denmark, headquartered Esvagt is a prominent player in the offshore wind service support area, a lot of its activity still centers on support for the offshore oil & gas industry.
Today, the company said that “a combination of an oil & gas market in a historical economic downturn and a new situation in consequence of the COVID-19 pandemic” is leading it to launch cost-cutting initiatives in response that include streamlining and pay reductions.
“Our oil & gas business is challenged in two essential areas of the current situation,” says CEO Peter Lytzen. “The facts that oil storage is full and oil & gas prices are low means that no investments are being made in well drillings. This has an impact on the ERRV [Emergency Response and Rescue Vessel] spot market, which is a considerable part of our business. At the same time, our rates are affected by exchange losses from the Norwegian krone and the British pound; two markets where Esvagt has a substantial presence.”
Additionally, the Norwegian shipyard Havyard, which is building Esvagt’s next three offshore wind Service Operation Vessels, has been in financial difficulties that meant that Esvagt had to contribute to an economic rescue package and accept a delayed delivery.
“All in all, these are elements that put Esvagt’s liquidity under pressure. We have to relate to this,” says Lytzen.
Esvagt says its Board of Directors and upper management have agreed to a 15 percent pay reduction, and management 10 percent. Esvagt’s onshore employees have been offered a voluntary arrangement involving a 5 percent pay reduction. The company says that there is also a “genuine understanding” from its over 1,000 offshore employees that “in times like these, large pay adjustments aren’t expected.”
“We have to balance our responsibility to keep our employees; to ensure the company’s continued healthy operation and at the same time tend to our obligations. We do not wish to send people home, and we can’t, because we have a responsibility as a subcontractor to society’s crucial energy infrastructure,” says Lytzen:
The pay reduction runs for a year, and together with a postponement of investments and some vessel decommissionings, contributes to ESVAGT having the necessary liquidity. Additionally,says the company, a renegotiation of contracts with partners and suppliers is to followe.
“We need the backing and support from our subcontractors to ensure that we, from a cost perspective, can regulate our activities with the financial reality we are in. It is my impression that the strong public spirit, which has been a solace during the corona pandemic, also applies across the industry. I am witnessing an understanding that we need to stand together in order to get through the current challenges,” says Lytzen.