Business Outlook 2018

BUSINESS OUTLOOK 2018

4.3 2018 Outlook

Figure 11: Snapshot of Contractor Company Sentiment for 2018

This year the supply chain is set to benefit from increased operational spend and the largest amount of fresh capital activity in the basin since 2014 (see section 5.2 on expenditure). In a survey of 58 Oil & Gas UK supply chain companies, 62 per cent had a more positive outlook for 2018 than they had 12 months prior. Oil & Gas UK forecasts that supply chain companies will generate revenue of £25-30 billion during 2018, which could represent the end of three successive years of decline, as contracts are awarded for new work programmes. However, it must be noted that there is likely to be an imbalance across the supply chain, with project development, turnaround and maintenance, and subsea activity the areas where

Much better than 2017

Better than 2017

Same as 2017

Worse than 2017

Much worse than 2017

Source: Oil & Gas UK Supply Chain Survey

any upturn is likely to be most felt. Although revenues may stabilise in some sectors, EBITDA margins across the supply chain may continue to fall as many companies begin work on fresh activity where rates were negotiated during the downturn. There have been other impacts from the downturn that will continue to challenge contractors this year. Examples include longer payment terms impacting cash flows, consolidated work scopes limiting access for sub-contractors in the supply chain, and more expensive access to finance for service companies that have seen credit ratings fall.

Figure 12: Snapshot of Contractor Company Revenues

Generated Revenue, 2018 versus 2017

Generated Revenue, 2017 versus 2016

Increased by over 10% Decreased by 0 - 10%

Increased by 0 - 10% Decreased by over 10%

Remained flat

Increased by over 10% Increased by 0 - 10%

Remained flat

Decreased by 0 - 10%

Decreased by over 10%

Source: Oil & Gas UK Supply Chain Survey

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