The Press and Journal (Aberdeen and Aberdeenshire)
Profit warnings abound in UK oil and gas sector
Report: EY predicts consolidation in oilfield services in fight for survival
UK-listed companies in the oil and gas sector recorded more profit warnings in the second quarter of 2020 than in the whole of last year, according to a new report by EY.
The professional services giant said its findings showed consolidation in the oilfield services sector was “inevitable”
“Consolidation within oilfield services is inevitable”
as companies fight for survival.
On profits warnings, it said 10 were issued by FTSE oil and gas firms across April, May and June, the largest quarterly number since the first quarter of 2015. The figure also eclipses the seven witnessed throughout 2019.
For the first six months of 2020, oil, gas and coal businesses said their profits would be well below expectations on 14 occasions, with Covid-19 blamed four-fifths of the time.
EY recorded warnings across the entire oil and gas supply chain. It said the oilfield services sector was under serious pressure due to the 20% capital expenditure cuts made by exploration and production companies in the wake of Covid and oil price slump.
Celine Delacroix, global oilfield services leader at
EY, said oil sector firms were adept at dealing with price drops. But she said the downcycle was more “complex” and outlook more uncertain than ever.
Ms Delacroix warned the next few months would be “all about survival” for some companies, who would have to prioritise cost cuts and fundraising.
She said: “Consolidation within oilfield services is inevitable. The companies that drive forward with M&A activity and embrace diversification to be cleaner and greener are the ones most likely to secure a positive, long-term future.”