Oil and gas industry ‘remained fragile’ in the second quarter

Oil & Gas UK’s second-quarter business confidence index published today shows that the outlook of the UK upstream oil and gas industry remained fragile in the three months from April this year, increasing modestly from 51 to 54 points.

The index measures a number of economic indicators, including changes in business confidence, activity levels, business revenue, investment and employment. It gauges overall industry confidence on a 100-point scale, with a higher rating (above 50) indicating a more positive outlook and a lower rating (below 50) representing a more negative viewpoint.

Ken Cruickshank, Oil & Gas UK’s supply chain manager, said: ‘Across the operator community, confidence increased slightly from 46 to 48 points, but this score still represents a negative outlook. Contractors are slightly more confident, with their outlook rising from 54 in the first quarter to 56 in the second.’

While still in negative territory overall, the operators’ two-point increase in confidence was driven by the majors whose index rose by 13 points from a negative 39 to a positive 52. In contrast, the independent operators registered a one-point decline, dropping further into negative territory from 48 to 47.

Cruickshank continued: ‘Confidence was hit at the end of the first quarter by the unexpected tax increase announced in the 2011 budget. While it appears that some companies may feel reassured by the Treasury’s willingness to engage on ways to mitigate the negative impact of the tax increase on investment, the confidence of many independent operators in particular continued to decline in the second quarter.’

The contractors’ confidence recovered somewhat from its seven-point decline in the first quarter of 2011 with a two-point increase in the second quarter, attributed to a rise among drilling and well services contractors and facilities providers. However, the marine and subsea and support services registered a drop in confidence.

Cruickshank concluded: ‘The second-quarter index illustrates that the contractors are generally more positive regarding future investment and activity than operators. Twenty seven per cent of contractors responding to the survey claim that activity levels are stable and that they expect that trend to continue, compared with just 18 per cent of operators.’