Resilience in adversity: Emerging from the COVID-19 crisis and adapting to the new reality in oil and gas

The UK Oil and Gas Authority has warned of "serious threats" to the North Sea sector, as turbulence takes hold globally. The onset of the coronavirus (COVID-19) has led to rapid demand destruction and rising inventory levels. Brent Crude has slumped by more than 60% since January and is now trading in the $20 - $30 a barrel range.

The coronavirus crisis will re-shape the oil and gas landscape (and many other sectors for that matter) to the point where it is entirely conceivable that we may begin to refer to ‘Before COVID-19’ and ‘Post-COVID-19’ as a key event in the global industry’s timeline.

All market participants across the energy value chain are being impacted. As companies mobilise their efforts, the focus is on weathering the turmoil, retaining critical operations and protecting cash flow.

Gettyimage: Oil rig with Oil and gas industrial platform for produced crude oil, natural gas and produced water in offshore or gulf, petroleum field. The picture was taken from fisherman boat

Average market capitalisation has been eroded across the sector*

-33%

Super majors

-39%

Majors

-56%

Oil services

*Jan. 2020 Monthly Average vs. 10.04.20 COB- Source: Bloomberg; PwC Strategy& research

“The industry is pulling all the traditional levers in a downturn: capex is being deferred or curtailed, headcount furloughed (or reduced) and cost reduction implemented where possible. However, the sector achieved significant cost reductions following the 2014 price crash; there is much less cost excess to target. Innovation and collaboration will be key to driving costs down further.”

Drew StevensonEnergy Leader, PwC UK

What lessons can be learned?

Cash is king for survival

Building resilience into business models, including the supply chain, to better manage black swan events

Innovation is king for longevity – time to double down on digital technologies and new ways of working

Trading capabilities in the current downturn and going forward will be critical to support earnings and cash flows and to de-risk volatility

The energy transition will return to the front pages in the near term

Contact us

Drew Stevenson

Drew Stevenson

UK Energy Sector Leader, PwC United Kingdom

Tel: +44 (0) 7710 002801

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