UK listed oil and gas companies issued more profit warnings in the second quarter of this year than the whole of 2019, according to EY’s latest profit warnings report.
There were ten profit warnings issued by businesses in the sector in Q2, compared to seven last year, the report outlined. In the first six months of 2020, there were 14 profit warnings issued by companies in the industry, EY highlighted, adding that this figure represented a 14-fold year-on-year increase. Of the first half figure, 79 percent were attributed to Covid-19, EY outlined.
“The biggest short-term issue for the oil and gas sector is the sharp drop in demand and in oil prices, triggered by the Covid-19 pandemic,” Celine Delacroix, EY’s global oilfield services leader, said in a company statement sent to Rigzone.
“While dealing with rapid decreases in the oil price isn’t new to oil companies, the root cause this time is more complex and the outlook more uncertain than ever,” Delacroix added in the statement.
“We may have already passed ‘peak oil’ and the sector is radically rethinking both its short and long-term outlook. It’s this combination of low prices and exceptionally high levels of uncertainty that has led to significant capital expenditure cuts and widespread write-downs,” the EY representative continued.
Delacroix went on to say that for some businesses, the next few months will be about survival and their priorities will be cutting costs and raising capital before debt markets tighten even further. The EY leader also stated that long-term growth and value depend on companies creating a stronger focus on technology, efficiency and investment to meet the related challenges of a low-price environment and decarbonization.
EY describes itself as a global leader in assurance, tax, transaction and advisory services. The company has tracked profit warnings from UK registered companies listed on the UK’s Main Market or AIM for 20 years.
To contact the author, email andreas.exarheas@rigzone.com
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