Around 20% of Europe’s mid- and small-sized oilfield service companies, the vast majority of which are British or Norwegian, are set to become insolvent as the effect of the Covid-19 epidemic will hit the continent’s OFS market hard and cut...
Around 20% of Europe’s mid- and small-sized oilfield service companies, the vast majority of which are British or Norwegian, are set to become insolvent as the effect of the Covid-19 epidemic will hit the continent’s OFS market hard and cut purchases by about $5 billion year-on-year, a Rystad Energy impact analysis shows.
The European services market, which was expected to stay largely flat this year from the 2019 level of $47 billion, is now facing a number of hurdles because of the outbreak. Cross-border travel limitations, supply insufficiencies, quarantines and capex reductions are only some of the market’s challenges.
‘This will have a pronounced effect on the European energy service market, which is heavily dependent on its international workforce and an efficient flow of goods and services between nations,’ Audun Martinsen, Rystad Energy’s head of oilfield service research, said.
Most of the lost purchases – worth around $4.5 billion – are expected to hit Norway and Britain, mainly within the segments of MMO, drilling rigs and well services.
Bankruptcies will have to follow as a result, especially for mid- and small-sized suppliers which in the UK and Norway add up to more than 1000 companies, added Martinsen. As many as 20% could become insolvent, Rystad Energy estimates. More companies could be added to this number when the rest of Europe is included.
‘For Europe, this crisis is worse than the one that OFS companies experienced in 2015 and 2016 after the oil-price fall,’ said Martinsen, adding that a recovery back to 2019 levels is likely to happen from 2024.
