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‘Lower for longer’ is the mantra many people in oil and gas circles are now adopting, as we look through 2016 and beyond.
The current landscape is very different from other downturns. We live in an ever-more complex world, with significant geopolitical events and sustained unrest in many oil-producing territories creating uncertainty. Supply currently exceeds demand, but there is evidence to suggest there will ultimately be an upturn in the price of crude.
There is no doubt, though, from speaking to the ‘large operators’ and ‘big players’ in the supply chain that we engage with globally, that times of change are also recognised as times of opportunity.
The consequences of price volatility will be severe in some quarters. The current level of price instability is perhaps unprecedented – in the few short weeks between our survey being completed and the research published, oil price has fluctuated between $50 to $27/bpd. That level of unpredictability will only serve to accelerate and exacerbate the change envisaged in this report.
For some – particularly those operating with large levels of debt – there will be undoubted pain. I fear that there are still some individuals, and some companies, thinking ‘this is a temporary blip…we should be ok’. That mindset will not promote survival. Even if prices do bounce back, the industry will have transformed.
There will be opportunities for those who have always understood that the oil and gas industry is not a one-way bet.
Those that are involved in production efficiency and operations, those that can genuinely do things differently, and those whose vision encompasses a broader horizon face a brighter future. Cost control, innovation, and much greater collaboration are the watchwords.
The same can be said of lawyers and other professional advisers. The day when deals could be done ‘the way they always have been’ are gone. At Pinsent Masons, our pursuit of greater innovation and efficiency to maximise value in dealmaking is relentless. The industry could and should expect no less.
As we work together with the industry to look ahead, one thing is certain – there will be winners and losers from the current cycle. And, while there can be no guarantees of success, sitting on one’s hands and ignoring strategic choices is simply not an option.