A Port of Dundee firm cut its workforce by more than half last year.
Waste management firm Augean was behind Dundee’s first major decommissioning project, the Shell Curlew.
Today it said it had cut the headcount at its North Sea decommissioning branch – which is primarily run from Dundee – by more than half last year.
It said this was as a result of “unprecedented reductions” in drilling and decommissioning activity.
Sites rationalised and overheads slashed
The Yorkshire-headquartered business said Covid hit the Augean North Sea Services (ANSS) business harder than any of its other divisions.
It said ANSS had been restructured, with senior management team costs reduced, sites rationalised and overheads slashed.
Augean wrote down the £900,000 cost of this rationalisation drive as an “exceptional” in its full-year results.
Augean also booked a £2.9 million impairment on the value of ANSS’s assets.
Revenues for ANSS dropped 36% to £22.4m in 2020 and adjusted operating profits sank to £1.4m from £2.6m.
Shell Curlew project
In the first half, ANSS was buoyed by its work on Shell’s Curlew vessel in Dundee, but revenues dropped more than 50% in the final six months of the year.
The Curlew clean-up had to be completed in Norway due to a lack of dismantling facilities in Dundee.
In an update to investors, executive chairman Jim Meredith said: “Decommissioning is expected to grow to be the most significant revenue and profit generator in the coming years.
“ANSS revenue decreased by 36% to £22.4m (2019: £34.9m).
“This segment saw a decrease in adjusted operating profit to £1.4m (2019: £2.6m) due to the impact of Covid-19, the subsequent reduction in the oil price resulting in unprecedented reductions in drilling and decommissioning activity.
“Revenue in the first half of the year benefitted from the decommissioning of the Shell Curlew vessel in Dundee.
“This was completed and all contractual obligations satisfied by June 2020.
“Revenue in the first half was some 50% higher than in the second half of the year with the impact of Covid-19 felt more seriously.
“In response to this the workforce in ANSS has been reduced by over half, the senior management team cost reduced, sites rationalised and the overhead cost base reduced substantially.
“The cost of this rationalisation is £0.9m and has been shown as an exceptional cost.”
Hopes for decom
The latest update shows more jobs have been lost since an update in September which said a third of workers had lost their jobs from the ANSS division.
Augean did seize the opportunity to purchase the Haliburton Ecocentre at Peterhead to process drilling and other waste from the North Sea oil and gas customer base.
This was completed at a significant discount in August and the initial consideration was £1.1m with a further £300,000 due in August 2021.
Trading has been broadly in line with expectation.
Augean still has high hopes for ANSS and the decommissioning market. It expects it to become the “most significant revenue and profit generator in the coming years”.
However, the group does not expect this market to pick up until late 2022 or early 2023.
London-listed Augean launched ANNS in 2012 and established operational footprints in Aberdeen, Dundee, Great Yarmouth and Lerwick.
At group level, Augean recorded pre-tax profits of £16.4m in 2020, a big improvement on losses of £15.3m in 2019. Revenues fell to £91.6m from £107m.
Its 2019 figures included a landfill tax assessments charge of £26.2m.
The group is embroiled in a landfill tax row with HMRC. It won one aspect of the dispute, leading to a repayment of £1.4m in December 2020.
Augean is awaiting the decision of the Lower Tier Tax Tribunal on one other key aspect of the dispute.