Business Outlook 2020 - Markets & Investments

BUSINESS OUTLOOK 2020

Key Facts

Substantial supply increases following the collapse of the OPEC+ agreement have resulted in a considerably oversupplied market The spread of Coronavirus has affected global oil demand significantly – 2020 is expected to see the first demand fall since 2009 The Brent price has fallen by more than 55% in early 2020, to below $30/bbl, with the potential to fall even further

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The current commodity price environment will cause industry significant challenges

The longevity of the price crash is not yet clear

< 25p /th

The NBP gas price more than halved in 2019, and has been trading at less than 25 p/th in February and March 2020

The increased availability of LNG imports has fundamentally changed gas market dynamics in the UK

1.7 m boepd

51% UK Gas

74% Oil Products

Domestic oil and gas production in 2019 was almost 1.7 million boe per day – crucial to helping meet UK energy needs in a safe, secure and affordable way

Production was equal to 51% of UK gas demand

and 74% of oil products

Despite stable production levels, E&P company revenues could be down by almost half since 2018, owing to lower commodity prices

The UKCS could be a cash-loss position this year for only the third period in the last 40 years

50%

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Lower activity will hit the industry’s hard-pressed supply chain

E&P companies will reduce activity levels to preserve cash

Many companies are already in an unsustainable financial position following the last downturn and the ability for companies to absorb further reductions is limited

Lower levels of investment now would be expected to negatively affect production levels in the coming years

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