ENGINEERING giant Wood has started cutting staff and putting employees on furlough and said it planned to scrap $160 million (£130m) dividend payouts to investors in response to the Covid-19 coronavirus crisis.

Aberdeen-based Wood said the coronavirus has had an unprecedented impact on the global economy which has been compounded by the sharpest decline in oil price in 20 years.

Warning: North Sea faces 'premature end' as oil and gas firms slash costs 

Brent crude fell to 18-years lows of less than $25 per barrel this month amid concern about the impact of the virus on demand and the start of a price war between Russia and Saudi Arabia.

The price jumped around 25 per cent yesterday after President Trump said he expected Russia and Saudi Arabia to agree a peace deal within days.

Mr Trump said on Twitter that he had spoken to his friend Crown Price Mohammed Bin Salman of Saudi Arabia and supply cuts of 10 million barrels a day were in prospect. Bloomberg news agency reported that a spokesman for President Putin of Russia said no talks had been held with Saudi Arabia.

Brent crude sold for $30.78/bbl yesterday afternoon compared with $52/bbl at the start of last month.

The turmoil in the market is posing huge challenges for firms that rely on oil and gas related work for income, such as Wood, which helps companies develop and operate fields.

Wood has operations around the world but remains a big player in the North Sea, where it made its name. It employs around 3,000 people working offshore or in Aberdeen and a further 1,000 in other areas of Scotland.

The company said it would take a range of measures to keep its people safe and healthy and protect its business and stakeholders by reducing cost, protecting cashflow and ensuring continued balance sheet strength.

It said the measures will include temporary furloughing, unpaid leave and operational salary reductions.

Wood added: “Regrettably, employee reductions are also being made in some areas reflecting the reduction in operational activity.”

North Sea oil and gas firms in plea for help amid warnings sector is in 'paper thin' state

After a series of oil and gas firms announced plans for deep cuts in spending Wood’s announcement will heighten concern about what the crude price slump will mean for the North Sea.

Energy consultancy Wood Mackenzie said the North Sea faced “mass project deferrals”.

Industry body Oil & Gas UK issued a plea for help to the UK Government recently claiming the sector has been left in a paper thin state.

It noted cuts in spending by firms that operate oil and gas fields could impact badly on many others in the wider supply chain as the industry emerges from the downturn triggered by the last crude price slump.

The coronavirus outbreak is causing serious problems for firms as they try to ensure the safety of staff and their access to vital equipment.

The numbers working on platforms offshore have fallen by around 3,000 as a result of firms reducing staff numbers to ensure appropriate social isolation measures are in place and cost-cutting moves.

Oil & Gas UK supply chain director Matt Abraham said around 9,000 people are currently working offshore compared with the usual average of 12,000.

One in four UK North Sea oil services jobs at risk amid slump

Wood said it had considerable levels of financial headroom and liquidity after starting the year with a strong balance sheet.

However, chief executive Robin Watson said: “Like many companies, Wood is being affected by the unprecedented event of Covid-19 and its impact on the global economy - an event compounded by the sharpest decline in oil price in 20 years. “

Mr Watson said the company’s board had made the “prudent and appropriate decision to withdraw its recommendation to pay the proposed 2019 final dividend”. This had been set at 23.9 cents per share.

Wood said its executive directors and senior leaders have elected to take a voluntary, temporary 10% reduction in base salary

Asked about the impact of its cost-saving measures on operations in the North Sea and Scotland a spokesperson for Wood said: “We’re working to establish the impact of Covid-19 and the subsequent decline in oil price for each region, including the North Sea.”

The spokesperson indicated that Wood will apply for Government funding towards the cost of wages for staff placed on furlough.

Mr Watson said Wood would review its dividend policy once there is greater clarity on the impact of Covid-19 and the substantial fall in oil prices.

Wood has reduced its reliance on oil and gas sector for work in recent years by expanding in other markets.

Shares in the firm closed up 15%, 22.85p, at 171.4p.

Oil & Gas UK is concerned that many firms in the sector will not be able to benefit from measures that have been announced to help businesses in the UK.

Some are too big to access Business Interruption Loan scheme support but may not meet the criteria for the financing that is available for firms that are classed as investment grade.

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