Oil and gas services and contractors have started to feel the effects of the oil price crash, although the pain has not been spread equally. Those reliant on the onshore US oil and gas industry have been the hardest hit because of the higher breakeven point on those operations.
Wood Mackenzie has forecast $110bn of new project investment will be deferred because of the oil price, with another $100bn “at risk”, making this a long-term hit to services companies.
Hunting (HTG) has halved its dividend while Weir (WEIR) and Wood Group (WG.) shelved their final payouts. Hunting made most of its sales through the US onshore-dominated Hunting Titan division last year.
Middle East-focused contractors have shown more confidence. ADES International (ADES) - which doesn’t have a dividend to cut - said its long-dated contracts and regional focus meant it was in a good position. Despite the positivity, the company must be hopeful clients do not rapidly pull back spending as it has a net debt pile of 3.1 times cash profits and a covenant at 4 times.
Fellow Middle East operations and infrastructure company Petrofac (PFC) has reacted more strongly, cancelling its final dividend and cutting capital spending by 40 per cent, or $60m, while aiming to reduce "overhead and project support costs" by $100m.
