Economic Report 2016 - Oil & Gas UK

Regardless of macro-economic events, there still remains a fundamental belief that a rebalanced and more efficient UKCS will bring a strong commercial outlook for service companies in the medium term, building upon a highly skilled workforce and safety-conscious working environment. 6.3 Supply Chain Segments To assess each segment of the supply chain in more detail, forecast financials have been compiled based on publically available global forecasts for listed companies with proportional changes to revenue and earnings applied to UK figures from 2014.

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Given the relative maturity of the UK market, the financial forecasts may prove to be optimistic in some cases, particularly for smaller companies with less diverse businesses.

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Reservoirs

Tier 2: Main Contractors and Consultants

Tier 3: Products and Services, Components, Sub-Contractors and Sub-Suppliers

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Seismic data acquisition and processing contractors Geosciences consultancies Data interpretation consultancies Seismic instrumentation suppliers

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The reservoirs segment comprises companies focused on seismic data acquisition, processing, interpretation and instrumentation, as well as geoscience consultancies. This sector is most sensitive to the oil price, mainly due to its heavy focus on exploration. The lower price environment has led to widespread delays and cancellations of exploration projects globally and on the UKCS. As such, this sub-sector of the supply chain has experienced a greater rate of reduction in revenues and profitability and notably it was the only segment to experience a fall in annual revenues in 2014. However, there have been relatively few insolvencies, limited to those exposed to heavy assets such as rig or seismic vessel owners (Dolphin Geophysical) or companies focused on non-core technologies (Arkex) in the current market. Existing players in this segment may benefit from the slight reduction in competition, but that remains to be seen.

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The reservoirs sector of the supply chain is most sensitive to the oil price, mainly due to its heavy focus on exploration.

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