Business Outlook 2019

BUSINESS OUTLOOK 2019

Figure 25: Snapshot of Contractor Company Revenue Expectations for 2019 Versus 2018

Much Higher

Higher

About the same

Lower

Much lower

Source: Oil & Gas UK

Source: Oil & Gas UK Despite the increase in new investment commitments, E&P companies have retained a focus on cost discipline amidst ongoing market uncertainty. Continued pressure on companies can be seen in the ongoing decline in EBITDA 13 margins, which fell at a faster rate than revenues in 2017. EBITDA margins are a commonly used indicator of a company’s operating profitability, shown as a percentage of total revenue. However, since they do not consider exceptional costs (such as restructuring) and capital costs, they can provide a more positive outlook than the true financial position of some companies — especially capitally intense sectors such as rig contractors, which are required to purchase expensive equipment and assets.

Figure 26: Supply Chain EBITDA Margins

12%

45

Costs

EBITDA EBITDA Margin

40

10%

35

8%

30

25

6%

20

4%

15

Average EBITDA Margin

10

2%

Supply Chain Revenues (£ Billion - Nominal)

5

0%

0

2010

2011

2012

2013

2014

2015

2016

2017

Source: EY

13 Earnings before interest, tax, depreciation and amortization.

42