Economic Report 2016 - Oil & Gas UK

ECONOMIC REPORT 2016

EBITDA across the segment is also expected to fall from a high of almost £1.4 billion in 2014 to just under £1 billion this year, although the impact of cost and efficiency improvements means the margins are likely to remain fairly consistent.

It would appear that the delayed impact of the downturn has given these companies time to consider fleet management and secure revenues from adjacent markets, such as offshore wind. Contracting models are also being modified with noted success coming from shorter term contracts and performance-led remuneration, highlighting the savings available to operators through more efficient solutions rather than simply cutting the headline cost. Moreover, companies in this area are collaborating with their customers and one another to improve their competitiveness through more targeted product and service offerings. Several companies (including Fletcher Shipping, Harkand and Atlantic Offshore) have, however, gone into administration and removed supply from the market, creating an opportunity to increase market share for surviving incumbents. Overall, despite significant falls in revenue over last year and into this year, the rate of decline has been slower compared to some other segments of the supply chain.

Companies in the marine and subsea sector are becoming increasingly exposed to the fall in the number of new development projects.

Looking ahead to 2017, the combination of falling forecasts in subsea expenditure (shown by Figure 41) and a continued oversupply of vessels means that analysts expect revenue to fall further. Any stabilisation or recovery is heavily linked to a return to subsea development spend, which, in turn, is likely to lag behind any initial growth in exploration and drilling.

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