Merged OSV major aims for twice original cost savings

Solstad Farstad said it achieved ‘annualised synergies’ and cost reductions of approximately Nkr400M (US$48M) in 2017 and has increased its cost reduction target to Nkr700-800M by the end of 2018.

“Solstad Farstad has and is working hard to meet the commitments we made to our stakeholders following the merger,” said chief executive Lars Peder Solstad.

“I am impressed by the strong commitment to reduce costs whilst operating safely and efficiently to the satisfaction of our clients. With the reduced cost base we will be more competitive and with our high quality vessels and operations we will be in a very good position when the market recovers.”

The merger that formed Solstad Farstad was completed in June 2017. Based on its experience in the first six months in operation as one company, Solstad Farstad believes much greater cost savings are possible. The company said the savings relate to three different areas.

The first is onshore administration. A new organisational structure has been implemented and administrative expenses have been reduced by combining offices globally and centralisation of functions. Common IT systems are being implemented, which will further increase efficiency and strengthen operations.

The second is offshore crew. Expenses are being reduced through using best practice to customise crew composition to each specific vessel, flag-state requirements, customer requirements and area of operations. 

Third is procurement and economies of scale. Combining the three companies have provided economies of scale relating to purchasing and logistics, and use of best practice will further reduce costs relating to maintenance and drydockings.

The company has also explored revenue synergies related to the merger. It said there are several contracts that illustrate the existence of such synergies, but the company has chosen not to quantify these.