U.K. Offshore Sector Foresees More Decline

The chairman of the U.K. energy firm OGN, Mr. Dennis Clark, has called on government to eliminate tax burdens on the country's energy firms in order to keep them competitive. 

In an open letter, Clark said that the U.K. oil industry – which has already taken a tremendous hit since crude futures began to slide last year – could disappear with sub-$40 crude and a tax structure favoring other localities. 

As of September, the BBC reported that the country's oil and gas sector had lost about 65,000 jobs. Worldwide, the losses are said to total in the range of 250,000.

Analysts with consulting firm KPMG said that “companies with cashflow constraints or large debt burdens are concluding that weathering the storm of low prices may not be possible for the length of time now forecast. They are now considering mergers and acquisitions at valuations closer to those of buyers,” suggesting fire sale pricing.

A new report out Monday suggested that the Scottish economy as a whole slid into contraction during the month of November, in large part due to the decline of North Sea oil and gas exploration. The negative growth was led by manufacturers, which reported that their business had taken a hit from shrinking orders by oil and gas firms as drilling activity subsides.

Also on Monday, shares of Irish oil and gas exploration and production company Circle Oil tanked 36 percent below their existing “distressed levels,” as revelations about the state of its balance sheet became public. Analysts suggested that the company was a case study in the financing of risky exploration activity with corporate debt.

Elsewhere, oil exploration seismic surveyors Dolphin Group filed for bankruptcy on December 14, the latest casualties of scaled-back exploration activity.

Dolphin had long-term debt of about $250 million, including $150 million in unsecured bonds.