Lower for Longer

The continuing resilience of oil production volumes - in spite of the weak price environment - continues to confound expectations.

This is creating 4 big challenges for the Oil & Gas sector in 2016:

  1. Timing/scale of an oil price recovery remains highly uncertain
  2. Management teams are struggling to forecast accurately, undermining financial stakeholders' confidence
  3. Large segments of the value chain are struggling to refinance forthcoming debt maturities or raise new money
  4. Work outs of upstream operations & vessels-based businesses are proving to be particularly complex due to contractual complexity

What can companies do?

  • Implement self-help measures such as cost cutting, working capital optimisation and capex prioritisation
  • Seek stakeholder support to buy time by amending/extending existing debt facilities, negotiating existing contracts or raising equity
  • Investigate M&A options - although buyer appetite is sparse and bids are low
  • Initiate contingency plans in severe situations

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