Page 12 - Euroil Week 11 2020

EurOil PERFORMANCE EurOil
Europe’s OFS market headed for mass insolvencies: Rystad
EUROPE
More than 200 companies are at risk of going under.
AROUND 20% of Europe’s mid- and small-sized oilfield services (OFS) providers could become insolvent amid the current market turbulence, Oslo-based Rystad Energy has warned in a research note.
The vast majority of the continent’s OFS firms are British or Norwegian. The impact of the coro- navirus (COVID-19) pandemic could result in the sector seeing a $5bn year-on-year decline in purchases, Rystad estimated. Previously the mar- ket’s purchases were expected to be flat this year, after totalling $47bn in 2019.
Cross-border travel limitations, supply insuf- ficiencies, quarantines and capex reductions are only some of the market’s challenges, the consul- tancy said.
“This will have a pronounced effect on the European energy service market, which is heavily dependent on its international work- force and an efficient flow of goods and ser- vices between nations,” Rystad’s head of oilfield services research, Audun Martinsen, said in a statement.
Most of the lost purchases – valued at $4.5bn – are anticipated to hit Norway and the UK, mainly within the segments of maintenance and operations (MMO), drilling rigs and well services.
Bankruptcies will have to follow as a result, especially for mid- and small-sized suppliers, which in the UK and Norway add up to more
than 1,000 companies, according to Martinsen. As many as 20% – over 200 companies – could become insolvent, Rystad said. More companies could be added to this number when the rest of Europe is included.
“For Europe, this crisis is worse than the one that OFS companies experienced in 2015 and 2016aftertheoil-pricefall,”Martinsensaid,add- ing that a recovery to 2019 levels of business was likely to happen starting in 2024.
A coronavirus case reported at Equinor’s Martin Linge production platform this month highlights the potential disruption to operations that the outbreak can cause. After reporting the case on March 11, Equinor evacuated up to 90% of the facility’s staff to shore. Martin Linge is undergoing commissioning and is slated to produce its first oil and gas in the third quarter of 2020.
The virus has played a significant role in the recent oil price crash, Rystad said. Com- bined with the general market volatility, this has pushed back many field development projects, the consultancy said. This has hurt the bottom line of oilfield service contractors such as Aker Solutions, which sent out a warning last week to its 6,000 employees in Norway about likely tem- porary lay-offs in 2020. Such a fate could soon befall many rival engineering houses in Europe as well, Rystad said. ™
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