Jeremy Webb is a partner in PwC’s London restructuring practice. He
has focused on large, complex, and cross-border restructuring work for
more than 15 years. He is experienced in a range of industries, but has
worked extensively in the financial services arena in recent years to help
management teams develop new business plans to present to stakeholders.
Webb also has experience in insolvency procedures outside of the UK.
Robert Turner is a director in PwC’s Oil & Gas Advisory team in the
United Kingdom. He is experienced in analyzing strategies and risks
related to oil markets and investments, including deep experience in
analyzing refining and marketing opportunities. Turner has advised
on a number of market entry reviews, valuations, and divestment
and acquisition processes in Europe and other global markets.
Traded liquid natural gas prices have
fallen significantly (almost as much as
oil), and lower pricing will trigger issues
in companies with fixed price contracts.
Coal prices have been in the doldrums
for a long time now, and lower oil prices
will simply heap more pressure onto an
already embattled sector. Those players
that lack significant cost advantage
or that are producing specialty coals
will continue to be under stress.
The renewables sector has been
growing and developing rapidly,
but a period of lower oil prices
might halt its growth. Issues have
already arisen in Southern Europe,
where governments that can no
longer afford them have cut feed-in
tariffs, which were implemented to
encourage investment in renewal
energy technologies. As electricity
prices fall, which they inevitably
will, so will the economic viability of
new renewable energy programs.
Much like the oil sector, viability issues
are expected to arise in generally
smaller support service and supplier
companies before they arise in the
actual operators. These companies
should plan and react now so that
they are not caught unprepared later.
A New Normal?
While the oil price fall was far from
unprecedented, it has fundamentally
changed the market, and whatever
one’s long-term view on price, the
damage is now done. As with any
major market shock, winners and
losers will be polarized, and that will
drive deal activity. Strong players
will look to acquire niche businesses
cheaply, and one can expect a wave of
consolidations. Meanwhile, much of
the non-oil economy can be expected
to show improved profitability.
However, there will be companies
that are not deal targets that find that
their profitability, attractiveness to
investors, and their prospects have been
dramatically altered. Some of them will
fail, while others will be restructured
to ride out the storm. Businesses that
require long-run oil prices of $80 or more
per barrel to remain viable are going to
need to rethink their strategies. Hoping
for a quick price recovery looks like
one strategy that is doomed to fail. J
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