Update on Aker Solutions' MMO Business in Norway

Statoil ASA today announced contract awards for maintenance and modifications services work offshore Norway. Five companies, including Aker Solutions, were awarded framework competition contracts spanning ten years where one or more of the companies may be asked to bid on standalone maintenance and modifications assignments at Statoil-operated oil and gas fields starting in the first quarter of 2016. Four companies, not including Aker Solutions, were awarded main supplier contracts for maintenance and modifications work in Norway.

Aker Solutions is currently a main supplier of maintenance and modifications services at Statoil-operated fields in Norway through a framework contract that expires in summer 2016 and that provides work for about 900 onshore and offshore employees. The absence of a new main supplier contract with Statoil will have serious implications for the company's maintenance, modifications and operations (MMO) business in Norway.

"We delivered a very strong and commercially sharp bid for the main M&M contract, which takes into account the major cost-efficiency improvements we are undertaking as a company and with our customers. This includes Statoil, which in the last two quarters gave our M&M team in Norway the top score in its customer satisfaction of suppliers," said Luis Araujo, chief executive officer of Aker Solutions. "We're disappointed by the outcome of this bid process, which was on terms similar to those of other MMO contracts that we've secured recently in Norway, the UK and Canada. Now we have to evaluate the consequences of this latest development."

The company anticipates lower work volumes representing about NOK 500-600 million in revenue next year when the current agreement with Statoil expires. This will have consequences for the workforce capacity and organizational structure of the MMO business in Norway, which has offices in Stavanger, Bergen, Trondheim, Kristiansund and Tromsø.

"While Aker Solutions continues to tender for other MMO work in Norway, this latest development will impact how we organize the Norwegian operations," said Per Harald Kongelf, head of Aker Solutions in Norway. "We expect to have to reduce the number of MMO locations in Norway and will provide more information when we have evaluated the overall situation."

Aker Solutions has since July 2014 reduced capacity in its Norwegian MMO business by about 750 permanent positions to adjust to lower demand as oil companies scale back spending amid concern over capital and declining oil prices. The company has about 16,000 employees globally. About 5,000 of these work in MMO, of which 3,700 are in Norway. The MMO business generated more than 50 percent of its revenue outside Norway in the third quarter of 2015.

"Going forward we will focus on strengthening our position as one of the most attractive suppliers of major modification work offshore Norway," said Araujo. "We see several exciting project opportunities in this segment as well as in our international MMO activities, where we have been expanding in countries including Canada and the UK."

Location: Norway