PERTH (miningweekly.com) – ASX-listed Oil Search on Wednesday announced structural changes in the wake of Covid-19 and the falling oil prices, which will result in a 34% decline in staff numbers.

The company told shareholders that full time employees will be reduced from 1 649 as of March, to 1 222, with a further 137 staff members to be transitioned out by the end of the year.

The redundancies will be effective across all of Oil Search’s locations, the company said.

Furthermore, dedicated teams are reviewing all capital and development projects operated by Oil Search, in order to identify phasing and cost saving initiatives that could materially reduce the break-even costs of these projects, while other cost reduction and continuous improvement initiatives will also be coordinated under Pathfinder, including third-party spend reduction programmes, the application of technology and data gathering to drive costs lower, and benchmarking for setting continuous improvement targets.

“The painful decision we have taken to optimise our organizational structure, enhance efficiencies and reduce operating costs have not been made lightly; they are the result of extensive studies aimed at ensuring we have an organizational structure that not only makes us more resilient to oil and gas price fluctuations, but also embeds a culture of continuous improvement, operational excellence and strict fiscal discipline,” said Oil Search MD Dr Keiran Wulff.

“We have reviewed how to make our company stronger by prioritizing activities and focusing on the capabilities that are required for us to be successful under a range of economic conditions.

“The work undertaken has been assessed against an independent domestic and international industry, organizational benchmarking study to ensure Oil Search’s new cost structures are competitive with global energy industry peers. In addition, the review incorporated employee efficiency and productivity analysis, capability reviews and studies on risk management, leadership and decision-making effectiveness.”

Based on the initiatives to date, 2020 production costs are forecast to reach $10.50/bl of oil equivalent, before one-off restructuring costs, compared with the prior guidance of between $11/bl and $12/bl of oil equivalent

Wulff said that the reorganization also built further on the company’s commitment to social responsibility and sustainability, with the company’s female representation in the workforce increasing from 25% to 28%, as well as a material increase in representation of Papua New Guinea citizens in senior positions.

“We are confident that, following these and other initiatives under way in 2020, including the decisive cuts in investment spending announced in March and the $700-million capital raising in April, Oil Search is positioned to deliver long term shareholder value,” Wulff added.