Last year 16 oil and gas companies became insolvent, finds Top Ten firm Moore Stephens
LAST YEAR 16 oil and gas companies became insolvent, finds Top Ten firm Moore Stephens.
The figure is up from two as the oil price slump takes its toll, falling to $50 (£40) per barrel from $120 (£97), with further falls and insolvencies expected. Despite the recent announcement by OPEC, most of the past year has dragged businesses across the sector into insolvency.
Jeremy Willmont, head of restructuring and insolvency, Moore Stephens said: “The collapse of the price of oil has stretched many UK independents to breaking point. Unless there is a consistent upward trend in the oil price, conditions will remain tough for many and insolvencies may continue.”
Moore Stephens revealed that in the preceding four years before the sharp decline only nine companies went insolvent in total, as shown in the graph.
This news comes as, last year in April, Scottish companies were found to have insolvency levels particularly high in oil, gas, and manufacturing.
The firm stated that oil and gas insolvencies have increased globally since the oil price slump, especially as the smaller North Sea operators face “particular stresses”.
Michael Simms, oil and gas partner at Moore Stephens, added: “North Sea oil producers face further headwinds from decommissioning costs of offshore rigs, difficult for those already financially strained.”
Some producers have delayed the impact through hedging strategies by guaranteeing higher prices but most of those contracts have now expired.
Oil and gas companies have also had difficulties in refinancing loans upon renewal and banks are looking to cut their exposure to this struggling sector.
Moore Stephens says that there are “risks” involved for purchasers of the business of oil and gas companies that go into insolvency, such as government approval for licenses and transferred decommission costs.