Businesses to consider challenges
Oil experts to discuss impact of price slump
Hosted by Oil & Gas UK in partnership with KPMG, Tuesday’s conference will bring together operators, service providers, funders and advisors to examine the price drop and to discuss ways all parties can work together to deliver a sustainable future for the industry.
Malcolm Webb, chief executive of Oil & Gas UK, will chair an expert panel discussion including Bob Keiller, chief executive of Wood Group, Anthony Lobo, UK head of oil and gas at KPMG, and Beth Mitchell, an independent industry analyst and advisor.
Mr Webb said: “With rising costs, taxes and inadequate regulation taking their toll on the UK offshore industry’s international competitiveness, there has never been a more critical time for business to join together and discuss the future of our sector.
“Collaboration will be key to maximising the economic recovery of our indigenous resources, and it is in that spirit I look forward to chairing next week’s event.”
Ms Mitchell is the author of a new report commissioned by KPMG which examines the volatility of global oil prices and what companies in the supply chain can be doing to manage that fluctuation.
Alan Kennedy, UK oilfield services lead partner for KPMG, based in Aberdeen, said: “We are all too acutely aware of how the national and international media’s spotlight on oil price volatility appears to the outside world to portray an industry in crisis. Despite the sharp price drop and cost-cutting exercises announced, we are not prophesising the arrival of the Four Horsemen of the Apocalypse on Union Street. However, we expect a serious downturn and challenges ahead, which are already beginning to impact significantly.
“In the North Sea, where we were facing a decline in investment anyway, the price drop further puts into focus the steps needed to prolong the life of the basin, the increasing urgency of implementing the Wood Report recommendations and the debate on the fiscal regime.”
The conference will also focus on what has been learnt from previous price crashes. In 2008 the crude oil price fell from over $140 a barrel to the levels currently being seen. The price recovered by 2010 and the industry moved onwards to an unprecedented sustained period of price stability.
Mr Kennedy added: “There was also a price crash in 1986, when the oil industry witnessed a new and extended era of low priced crude and saw little in the way of sustained price increases for many years.
“There are differing views as to whether we are in 2008 or 1986? An alternative view is that with the advent of US Shale, the historical supply and demand drivers and levers have changed, with OPEC now a price taker rather than price maker, and so we are in unchartered territory.
“None of us can control the oil price – it is a “known, unknown”, and we are not in the business of forecasting future prices. It is nonetheless clear that the implications of the price decline will be significant, albeit cannot be predicted with any certainty.
“However, we believe that companies can take steps proactively to optimise their position in whatever circumstances emerge.
“Even before the crude price fall took hold in the second half of 2014, the UK industry itself had recognised the need to ‘tackle cost, efficiency and productivity challenges’ that had led to the double digit annual cost increases in the UK Continental Shelf in the last few years.
“At $60 a barrel, sustaining profitability in operations in the North Sea is a real challenge. The twin areas of cost and cash liquidity are therefore expected to be ‘the key priority’ for all given this price fall.”
The Oil & Gas UK breakfast event, held in partnership with KPMG, takes place on Tuesday 3 March at the AECC from 7.30am.
· Bob Keiller, CEO, Wood Group
· Alan Kennedy, UK Oilfield Services Lead Partner, KPMG
· Anthony Lobo, UK Head of Oil & Gas, KPMG
· Duncan MacAskill, Aberdeen Senior Partner, KPMG
· Beth Mitchell, Independent Analyst and Advisor
· Michael Tholen, Economics & Commercial Director, Oil & Gas UK
· Simon Virley, KPMG, formerly Department of Energy and Climate Change
· Chaired by Malcolm Webb, Chief Executive, Oil & Gas UK
Subsea company goes into administration
Blair Nimmo and Geoff Jacobs of KPMG have been appointed Joint Administrators of Specialist Subsea Services and made 77 of the 82 employees redundant.
The business has been trading since 2007 and was acquired by the Reef Group in 2009.
S3 operated from Aberdeen and specialised in remotely operated underwater vehicles (ROVs), offshore survey, geotechnical and subsea intervention, including vessel operations.
Following the insolvency of S3’s parent company and largest customer, the company’s cash flow issues intensified and new investment could not be secured in time to meet its liabilities. The appointment of administrators was therefore necessary. ompany’s assets and to help market the business and assets for sale.
The remaining five employees have been retained to assist the Joint Administrators to realise the company’s assets and to help market the business and assets for sale.
Mr Nimmo said: “The company is well known in the subsea services industry and has a significant infrastructure comprising several ROV systems together with significant subsea equipment, a customer base and intellectual property.
“We will do everything we can to seek a buyer who may be able to protect the business and which would maximise recoveries for creditors whilst also helping to maximise opportunities for the workforce. We would encourage any party who has an interest in acquiring the Company’s business and assets to contact us as soon as possible.
“We will be working with the employees and the relevant government agencies to ensure that the full range of support is available to all those affected. We would like to thank the remaining staff for their co-operation during this difficult period.”