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Oil & Gas UK Index shows business confidence in UK oil and gas industry still fragile
| Date: | 16 Dec 2009 | | Details: | Oil & Gas UK is today (16 December 2009) launching its first business confidence index which shows that whilst there are signs of recovery in certain parts of the UK offshore oil and gas industry, business confidence in the supply chain remains fragile, with some way to go before it is fully restored to levels last seen some 18 months ago. Oil and gas production companies are more positive about the economic outlook than at the beginning of the year, but confidence within the industry's supply chain has yet to pick up, with the marine, subsea, drilling and well services sectors in particular still experiencing the impact of the economic downturn on their activity and business revenues.
The Oil & Gas UK Index is a new quarterly index which, for the first time, provides an in-depth measure of changes in business sentiment across the oil and gas industry, giving an enhanced understanding of future trends and business challenges. It gauges the relative performance of the diverse sectors within the offshore industry against nine economic indicators to gain a better insight into the overall health of companies active on the UK continental shelf.
Companies are surveyed at the end of each quarter to capture changes in investment, revenues and sales, operation and running costs, manpower and day rates, expenditure in research and development, employment and training as well as general business confidence and activity. Businesses canvassed include those in oil and gas exploration and production as well as suppliers in drilling and well services, facilities engineering, operations and maintenance, marine and subsea services and general support services.
Three surveys have been carried out to September this year and the results are now considered sufficiently mature to launch. The indices gathered have been aggregated to provide the overall measures of industry confidence, on a 100 point scale, with a higher rating (above 50) indicating a positive outlook and a lower rating (below 50) giving a more negative standpoint.
The key findings for the first 3 quarters of 2009 are:
· The Oil & Gas UK Index for Q3 2009 measured 50, up 4 points from Q1 2009.
· On average, confidence amongst exploration and production (E&P) companies appears to be more positive than businesses in the supply chain. Confidence in the E&P sector gained 10 basis points across the year to reach 63 in Q3 2009, while across the supply chain it rose from 41 to 47.
· Within the E&P sector, the independent production companies are more optimistic than the major, integrated companies, with the former reporting more positive outlooks on overall business confidence, investment, activity growth and business revenues.
· The drilling and well services and marine and subsea services sectors appear to have been hit hardest by the prevailing economic climate. Business confidence in these segments was on average 11 points below the industry average throughout the year. By Q3, the drilling and well services index was 12 points below the index average and the marine and subsea index was 13 points below.
· On employment, the supply chain companies are still feeling the impact of reduced activity and postponement of investment, however the whole industry is intent on retaining its skilled workforce and is only resorting to job cuts where no other solution prevails.
· Overall, the pressure to reduce costs and raise competitiveness is still working its way through the province. E&P companies acted early in response to the changes in the oil price and are now gaining confidence on the delivery of the programmes put in place. Wells and drilling, marine and subsea services are still working to drive the costs down in their businesses to restore competitiveness.
Paul Dymond, Oil & Gas UK's operations and supply chain director, explained: "Although we have seen a marginal improvement in business confidence towards the year end as the oil price lifted from $33 per barrel in January to the current prices in the $70s, the overall ranking of 50 points at the end of Q3 suggest that business confidence in the upstream sector still remains fragile. The enhanced understanding of our business environment that the Index gives us will allow Oil & Gas UK to give particular attention to key industry sectors faced by challenge.
"The survey shows that the supply chain, and in particular the subsea, marine, drilling and well services sectors, have been hit hardest, with confidence rankings well below average. In 2010, it will be a strategic priority of Oil & Gas UK and its newly formed supply chain directorate to address the issues arising here.
Malcolm Webb, Oil & Gas UK's chief executive, added: "In these challenging economic times, it is important that the UK focuses on the health of the key sectors of its economy which can act as a barometer for recovery. The new Oil & Gas UK Index will aide this by providing a better insight into the health of the offshore oil and gas sector and tracking how each of its diverse segments of activity is performing. The surveys will continue to be published on a quarterly basis and over time it is hoped this new index will become a useful forecasting tool for the sector.
"Oil & Gas UK remains very keen to work alongside government to help restore business confidence within our industry for the future. This vital industry is one of the UK and Scotland's most important employers, tax payers and wealth creators. It can help lead our country out of recession and it is vital that it receives the backing and encouragement from government through the tax and regulatory regime to enable it to do so
Ends
Notes to editors
The full survey, which is based on responses from 350 companies, can be found on: http://www.oilandgas.org.uk/issues/operations/Index_Dec_2009.pdf
Oil & Gas UK is the leading representative organisation for the UK offshore oil and gas industry. Its 93 members are companies licensed by the Government to explore for and produce oil and gas in UK waters and those who form any part of the industrys supply chain. | | Contact: | For further information, contact Britta Hallbauer on 01224 577331
16/12/09 |
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For all press enquiries please contact:
Trisha O'Reilly at Oil and Gas UK. Tel: 0207 802 2422 Email: toreilly@oilandgasuk.co.uk
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