Seeing the oil price go down, many of Archer’s customers have decided to significantly reduce their investments and expenditures.
The company has said that the reduction is most prominent in the US land market which, at the current price of oil, is uneconomical in many basins.
“We have seen a fast reaction, as the US land rig count has dropped since its peak at the end of November 2014, and within a period of 2 months has dropped in excess of 500 rigs or 30%. We expect this decline to continue throughout the first and into the second quarter 2015 although the extent and more importantly the duration of this decline is hard to predict,” Archer has said in a statement.
North Sea activity down too
It’s not all land, as Archer has cited a lack of work offshore, in the North Sea, both in Norway and the UK.“Similarly we have seen a reduction in activity in the North Sea, which to some extent was already communicated at the end of the third quarter 2014 as many of our customers on the Norwegian Continental Shelf reduced spending as part of longer term cost saving initiatives.
“This reduction of activity has accelerated during the end of 2014 and the beginning of 2015 in particular in the UK, where several of our customers decided to cancel or delay projects or to stop drilling operations and idle platforms,” the company has said.
To remind, early in January, Talisman cancelled the two year drilling contract for Archer Emerald. The contract which was planned to start in January 2016. Several other clients informed Archer of cancellations or a reduction in activity. This includes the White Rose engineering project for the design of a new platform in Newfoundland, Canada. It also included the reduction of drilling activity for platforms with Apache and Shell in the UK and BP in Norway.
11 percent
In response to the fall in demand, Archer has said it will have to let go a 1.000 workers, or 11% of its total workforce.“We are working with our customers to manage the reduction in activity in an orderly and safe manner and we are adjusting our workforce, both onshore and offshore, to adapt to the lower activity levels. In addition we are closely collaborating with our customers in order to improve drilling efficiencies and reduce downtime in order to reduce the overall drilling costs,” Archer has said.
The company has said it continues to review its compensation, bonus and benefits plans in order to bring them in line with the current economic climate.
Archer is also working with its suppliers and subcontractors to reduce its cost base to maintain a base level of profitability and generate positive cash flow.
Archer Limited is not the only oilfield services company forced to lay off workers due to the challenging market environment. The whole sector is under pressure. Last week, Aker Solutions and Hunting both said they would need to make the cuts. Also, earlier in February, FMC Technologies, Maersk Drilling, KCA Deutag all said that the weak demand for their respective services forced them to lay off workers.