As financial analysts predicted the exit from the tunnel for the oil sector, the Covid 19 pandemic hit it hard, threatening to bankrupt most oil service providers. Several French groups and companies are on the front line.
Hardly recovered from the 2014 oil crisis, these companies, unknown to the general public but central to the industry, will have to face a deep crisis. With the vertiginous fall in the price of a barrel which is currently below 15 dollars, large groups like Total have announced the sharp reduction in their investments, especially for new projects deemed too expensive. The companies that provide various services and equipment – seismic studies, boats, platform construction, drilling – are dependent on these oil and gas giants. In the shorter term, these companies " are already impacted by disruptions in supply channels. There is a break in certain specific areas of the manufacturing chain, with products that were made in China, Korea and Italy Added Jean Cahuzac, president of Evolen, the professional organization of the sector in France.
In the longer term, the question is how long these companies can last. In Texas, the world’s home of the oil industry, the effects are already being felt. Technip FMC, the former French flagship of oil rigs, has announced a series of savings including a 30% decrease in its investments, to $ 300 million. The “Surface Technologies” pole, on the front line because of its strong presence in the United States, will reduce them by $ 100 million. No luck either for CGG (Compagnie Générale de Géophysique), specializing in exploring the subsoil, whose restructuring efforts were starting to bear fruit, was once again hit hard by this coronavirus crisis and its uncertain consequences which cast an additional veil on the continuation of the activity. "We remain vigilant on the evolution of the situation on our activities and on a possible revision by our customers of the E&P, exploration and production plans, taking into account the volatility of the oil price Said a spokesperson.
The texan colossus Schlumberger, led by Frenchman Olivier Le Peuch plans to cut its budget by up to 30% to $ 1.2 billion for the year. "The destruction of demand for oil leads to an unprecedented supply-demand imbalance of the order of 20 to 30 million barrels per day. This results in short-term uncertainties in the activity and budget forecasts Said Olivier Le Peuch noting that Schlumberger expects exploration and production companies to cut capital spending by about 20% worldwide this year. North America is expected to be the most affected with a 45% drop. Other measures have been taken, including the 20% drop in salaries for managers and executives from 1er April. The company is also accelerating the restructuring of its land-based activities in North America with the closure of certain facilities if necessary, the availability of staff and numerous layoffs in the United States at several sites.
For the French manufacturer of oil field pipes Vallourec, the effect is devastating, putting the group at risk. In response to the dizzying and brutal drop in activity in North America, the group was forced to lay off more than 900 people, spread over different sites, representing a third of the company's workforce in this region of the world. Four installations in Houston are thus concerned in addition to its American headquarters. For the new chairman of the executive board, Édouard Guinotte, who took office on March 15, it is impossible to calculate the impact on the whole of 2020. Also, the strong man of the group announced a new plan savings of an additional 200 million euros in the years 2021 and 2022, in addition to the 200 million in progress in 2019-2020. Vallourec will not pay a dividend for this financial year and has deferred its capital increase plan by 800 million euros to relieve its abysmal debt. "Vallourec is a tightrope walker on a tightrope. And the rope is giving way "Sums up an oil specialist at Edward Jones. According to him, these companies and their sector of activity will undergo a drastic overhaul and irreversibly change the Texas oil landscape.
