On Thursday night wrote Dagens Næringsliv that Statoil will cut 1,500 employees and 500 contractors. This is history’s greatest cut round in the company.
– These are big numbers for Statoil and there are large numbers of Stavanger, said oil analyst Trond Omdal at Pareto Securities.
He is supported by Tore Guldbrandsøy, head of Rystad Energy’s Stavanger office.
– This beats out big in the Stavanger area, and we have seen many examples now. It will also have repercussions. But we have had many good years, where we have sailed away. There is no crisis, but it is for the individual, he said.
Omdal stressed that Statoil has not confirmed that it is 2,000 jobs to be cut. Meanwhile, he said that the group aims to cut 20 percent in operating costs on the Norwegian continental shelf, which may also have personnel consequences.
– Currently Statoil been quick to ensure that most have gone by with pensions or severance packages. The question now is whether one is able to do it the same way now, or whether it comes clean redundancies.
Painful but necessary
Some of these may work in the supplier industry, believes Omdal.
– But of course it’s a risk of losing valuable skills and experience. It’s a challenge, but we must remember that activity and investment in the oil industry comes down from record levels, said Omdal.
– This is good for Statoil and for industry . It is necessary cuts.
Guldbrandsøy said that although the cuts may be painful for the individual, it is generally natural that all companies look at how they can optimize their activities and cut costs.
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– This is good for Statoil and for the industry. It is necessary cuts. There is always the risk of losing skills, but it is very much talented people in Statoil who may not have had the chance to show off. This can create new opportunities and challenges for those who are left and will be enforcing more efficient work processes, he said.
– This is necessary and reasonable to do to realize the opportunities ahead since higher oil prices are not enough to realize the full potential of the Norwegian continental shelf. There is good and reasonable, but experienced obviously that crisis for some.
New upswing in 2017
In 2015, only one major project Statoil has made an investment decision on – Johan Sverdrup says Omdal. Besides the company has no other major projects which future investment decision this year.
– They have postponed several projects, like Johan Castberg and Snorre 2040. It leads to less activity, which in turn has consequences for the dimensioning of Statoil organization.
Omdal believes that investment in the oil industry in 2015 will fall by 15 percent this year and by a further 5 percent next year. But then comes a new upswing in 2017.
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Also Guldbrandsøy believes that there will be a new rally this time, probably with new growth in investment from 2017.
– As we expect many new projects, both large and small, will come. Industry working with cost reductions that will make this possible. Then I guess they have enough people to cover this. We must also remember that although it is an investment reduction of 10-20 percent this year, as investment and activity level still far higher than the level of 4-5 years ago, he said.
– The is easy to criticize Statoil that they cut, but it is after all those responsible for 70-80 percent of activity on the Norwegian continental shelf and what they do is important for Statoil and the Norwegian continental shelf are competitive in the future.
No belief in change
Statoil CEO Eldar Saetre and outgoing CFO Torgrim Reitan have both stated recently that during the next upturn will be important to hold back and not let the costs run wild as before.
– It is difficult to understand why it should be different than before. Industry springer in packs.
Neither Omdal or Guldbrandsøy have some faith that it’s going to happen.
– The big oil companies have difficulty maintaining capital discipline in good times, and is a bit like supertankers that it takes some time to reverse the recession, said Omdal.
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– When First the big oil companies have finally gotten out consultants and cut positions through pension and severance packages, as has on previous occasions happily begun to approach the next time period of expansion, he said.
Guldbrandsøy adds:
– It is difficult to understand why it should be different than before. Industry springer in packs. It is an industry that is cyclical. The paradox is that this is a long-term industry planning horizon of typically 10 years from discovery to production, but it is still an industry where it is difficult for the individual player to act counter-cyclically, but there is always someone smart who can do this.
– Will there be more job cuts in Statoil?
– There is little speculative answer. But we do not exclude the possibility that this may be the last cut round. It is not notified further downsizing rounds. It will of course also depend on future oil prices, said Omdal.
– In some cases we have also seen companies hire back some of the same people who have been downsized as consultants when activity begins to tick upward again.
– If they need more cuts, is difficult to know. You hear about companies that have cut up to 40 percent, says Guldbrandsøy.
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