More than 200 oilfield services companies might be forced to declare bankruptcy – most of them in Norway and the UK – due to the effects of the Covid-19 pandemic and its effect on oil prices.
According to Audun Martinsen, Rystad Energy’s Head of Oilfield Service Research, 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.
The European service market, which was expected to stay largely flat this year from the 2019 level of $47 billion in our pre-coronavirus estimates, 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,” says Audun Martinsen.
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 1,000 companies, adds Martinsen. As many as 20%, effectively more than 200 companies, could become insolvent, Rystad Energy estimates. More companies could be added to this number when the rest of Europe is included.