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Oil & Gas UK: Business confidence improves in the UK oil and gas industry, but overall picture remains fragile

The Oil & Gas UK Index published today (10 February 2010) shows that business confidence appears to be returning to the UK oil and gas industry. The overall industry index rose by 6 points to 56 in the final quarter of last year from 50 in the previous quarter, suggesting that the sector, hit by low oil and gas prices and the freeze on access to capital in the earlier part of 2009, is emerging from the recession with more optimism than at any other point in the past 12 months. The index provides the overall measure of industry confidence on a 100 point scale, with a higher rating (above 50) indicating a positive outlook and a lower rating (below 50) giving a more negative standpoint.

The overall improvement in confidence has been driven by increased activity across the oil and gas supply chain, with the well services, drilling and the marine and subsea sectors showing the most positive change compared with previous quarters.

However, the overall ranking of 56 suggests that although business confidence and activity is improving, the outlook for the upstream sector is still fragile.

Brian Kinkead, Oil & Gas UK's recently appointed supply chain director, explained:
"In the first three quarters we saw a clear gap in confidence levels between the exploration and production companies and the industry's supply chain, with the supply chain index being 16 basis points lower than the exploration and production (E&P) index. In Q4, this gap has significantly narrowed to 7 basis points difference. The increase in optimism within the entire upstream sector suggests that investment opportunities are being considered by E&P companies which is filtering through to increased activity and optimism within the supply chain. This improvement is welcome, however, we still have some way to go to rebuild business confidence to the levels of a few years ago."

The key findings for Q4 of 2009 are:

  • The Oil & Gas UK Index for Q4 2009 measured 56, up 6 points from Q3 2009.
  • On average, confidence amongst E&P companies appears to be more positive than businesses in the supply chain, yet the gap has narrowed considerably. Confidence in the E&P sector is at 61, down 2 basis points from Q3 2009, while across the supply chain it rose from 47 to 54.
  • The drilling and well services segment has seen a steady increase in confidence over the year, from 35 in Q1 to 50 in Q4.
  • The marine and subsea services segments have seen a similar rise in optimism, moving from 30 points in Q1 to 54 in Q4.
The survey gauges the relative performance of the diverse sectors within the offshore industry against nine economic indicators to gain a better insight into the overall health of companies active on the UK continental shelf. Companies are surveyed at the end of each quarter to capture changes in investment, revenues and sales, operation and running costs, manpower and day rates, expenditure in research and development, employment and training as well as general business confidence and activity. Businesses canvassed include those in oil and gas exploration and production as well as suppliers in drilling and well services, facilities engineering, operations and maintenance, marine and subsea services and general support services.

Oil & Gas UK is the leading representative organisation for the UK offshore oil and gas industry. Its 103 members are companies licensed by the Government to explore for and produce oil and gas in UK waters and those who form any part of the industry's supply chain.

Published 10/02/2010

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