Home' Trinidad and Tobago Guardian : January 25th 2016 Contents A16
Guardian www.guardian.co.tt Monday, January 25, 2016
A new report from the Associ-
ation of Chartered Certified
Accountants (ACCA) outlines the
key things business leaders in the
oil and gas sector need to master
if they want to be successful in
the most volatile and competitive
era the sector has ever seen.
Faye Chua, head of futures at
ACCA said: "Right now, the risk of
going under is a very real one for
many oil and gas companies.
Three major factors have com-
bined to create a perfect storm in
the sector. One---lower cash-flows
due to depressed oil prices. Two---
the existing debt overhang. And
three---the so-called great crew
change as the impending retire-
ment of senior expert professionals
over the next five years leaves a tal-
ent vacuum in its wake."
Business chiefs who can success-
fully steer their organisation through
this challenging period will be set
to prosper. So what should the suc-
cessful leader consider as he or she
negotiates these challenges?
According to Chua, after
analysing market conditions and
taking the views of a range of key
strategic players in the sector, four
key areas of focus emerged.
"The key to navigating the chop-
py waters we are currently expe-
riencing in the oil and gas sector
is good management of growth,
costs, funding and externalities. Get
those four factors under control
and you give your organisation the
best chance of success."
Association of T&T
and Clint Williams,
during a courtesy
call at his office at
focused on reform
advertising by the
standards in media.
Identify and postpone projects with
a high degree of uncertainty. Be espe-
cially ruthless with any at the early
stages of development which can be
killed without much fuss.
Seek partners to share in the risk---
and of course, reward, of projects. For
example, through part-sale of operating
interest in new discoveries.
If you can, explore opportunistic
growth via acquisition in areas with
room for consolidation, for example
oilfield services. There is no reason that
the current environment should lead
to a growth paralysis mindset.
There could be valuable growth
opportunities right now, for example
via M&A or by continuing investment
in nationally important, high-profile
projects with longer-term value.
Do not throw out the baby with the
bath-water. Concentrate your asset
sales on those not central to long-term
strategy as much as possible. Organ-
isations with a strong core focus are
always better prepared in times of
extreme stress or volatility.
Where redundancies are inevitable,
manage them carefully to account for
skills-gap impact, and ensure readiness
for future growth when the oil price
Re-negotiate discounts with con-
tractors to manage service costs and
on-going expenditure. There could be
room here as many suppliers may prefer
lower margins to idle machinery in the
challenging times we are currently
In the near term it can often all be
about survival but do not lose sight of
a credible growth story for the longer-
term. To give your organisation the best
chance of attracting funding, ensure
the security of your current income
stream, even if it is reduced. That sta-
bility is key to ensuring there is a con-
sistent stream if income.
It is important to model the impact
of rising interest rates on sourcing bank
and debt funding. Seek a realistic picture
as oil prices cannot be modelled on a
safe, upward trajectory to pay for higher
rates with future income as they have
been in the past.
As minimising risk and exposure
becomes critical, explore non-debt
options for funding. For example, with
specialist equity investors who play
exclusively in the oil and gas sector. In
short, private equity funds are going
to be your friends.
Your organisation should aspire to a
clear and respected voice on key sector
issues such as the advocating role of
government, whether via regulations
and global transparency frameworks,
or tax incentives to support reduced
On a similar note, the inevitable
short-term fire-fighting should not
come at the expense of the long view.
You should also be looking at on-going
evaluation of strategic issues such as
climate change policy (COP 21), and its
implications in the near and longer
ACCA advice for oil and gas execs
Faye Chua, head of
futures at ACCA
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