“Few could have predicted what a rollercoaster year 2014 has been for the oil and gas industry. Many medium-sized companies will be finishing the year with a share price well below January 2014 levels, with only a handful managing to contain their share price loss to less than 10%. The fall is even more pronounced within the oil field services (OFS) sector, as pressure mounts from industry big hitters to contain costs, with some OFS companies seeing their share price slashed by over 60%.
“Some of the largest falls in share price have been felt by companies with significant exploration portfolios, signalling that the market doesn’t currently place a high value on explorers compared with producers. This could be a worrying indicator for the future health of the industry if a future pipeline of exploration is not being created, in favour of current production.
“With the industry acclimatising to the prospect of the oil price remaining lower for longer, those in the boardroom will be reflecting over the festive break on what a year it’s been for the industry, and what 2015 might hold. Cash management and operational efficiency will certainly be the buzzwords of 2015.
“With falling share prices affecting the industry, 2015 could be a bumper year for oil and gas acquisitions. For small and mid-sized companies, many of whom are wrestling with committed projects that are economically unviable in the current market conditions, there could be sleepless nights ahead. However, for companies with considerable cash and debt capacity things are looking up, as they start to circle overhead waiting for the right moment to move.”
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Ann Burton, KPMG Press Office
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KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 12,000 partners and staff. The UK firm recorded a turnover of £1.9 billion in the year ended September 2014. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 162,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.