Norwegian oil services firm Subsea 7 reported a smaller-than-expected fall in second-quarter earnings on Wednesday and said it would cut costs by up to $550 million by early next year as it whittles down its fleet and reduces staff.

The company, which specialises in underwater construction for the oil and gas industries, said it had booked a $100 million charge out of a total $140 million related to the cost reduction initiatives, which include 2,500 job cuts.

Subsea 7, which focuses on the North Sea but has a global operation, will also cut its fleet by 12 vessels from 39. It expects savings of $400 million from the cut in staff numbers and $150 million in vessel costs.

Quarterly operating profit fell to $169 million from $350 million a year earlier, above the average forecast of $150 million in a Reuters poll of analysts, and its order backlog fell to $7.2 billion from $7.6 billion three months earlier -- also better than expected..

It is the second quarter running that Subsea 7 has beaten forecasts despite tough conditions in the oil services industry, which is often hit hardest by a downturn in the oil industry. Its shares soared to multi-month highs after its first quarter results.

The company said it would extend by 24 months a $200 million share buyback programme which was started in July 2014. It maintained its guidance for annual revenues "significantly lower" than 2014 and a lower margin.

"The fundamental long-term outlook for deepwater subsea field developments remains intact despite the challenges facing the industry as a result of the lower oil price," it said. 

Source: www.reuters.com

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