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ECONOMIC REPORT
2016
50
Figure 35: UK Reservoir Segment Financial Results and Forecasts
Currency
£ million
2011
2012
2013
2014
2015E
2016E
2017E
Revenue
1,092
1,219
1,355
1,244
878
643
680
% Change
12%
11%
(8%)
(29%)
(27%)
6%
EBITDA
162
171
245
145
99
63
77
EBITDA
margin
15%
14%
18%
12%
11%
10%
11%
Source: EY
The majority of reservoir-focused companies have been restructuring operations, removing costs and rebalancing
headcounts to counter the significantly reduced activity over the last two years. This has been particularly observed
among consultancies that are people-based and where the cost base is largely variable. Another important factor
has been the changing relationship between companies and their contracted employees, increasingly moving to
remuneration based solely on voyage time rather than being paid retainers for periods spent off vessel.
The changing balance between contracted work and more multi-client work has partly driven the continued
erosion of EBITDA margin. A stark shift to speculative multi-client work has impacted contractors’ bottom line and
those companies with extensive multi-client libraries will be best placed to rework existing data for sale to clients.
Even prior to 2014, the UKCS posed challenges for reservoir-focused companies, as the number of E&A wells
drilled had been falling sharply since 2008. As such, companies in this part of the supply chain have consistently
generated more export revenues than any other segment, particularly as global spending on seismic was on an
upward trend until the fall in price, as shown by Figure 36 opposite. However, the over-riding impact of a lower
oil price environment has meant that global seismic spend has now fallen dramatically, cancelling out any natural
hedging from revenues generated internationally.