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Shell and BP have lost billions – now the low price of crude is hurting other firms too



Oil is slowly climbing back to $50 a barrel as a deal between Saudi Arabia and Russia and an agreement on production in Venezuela helped to stabilise prices.

The production agreements could finally give some assurances to dozens of companies who have suffered since crude slumped from $114 a barrel in 2014 to $28 early this year.

Oil supermajors such as BP and Shell have been high-profile casualties, losing billions in profits.

They’ve written off billions of pounds and have had to slash tens of thousands of jobs as they change their businesses to cope with the reduced profits.

It’s prompted hundreds of North Sea oil workers to strike over pay – the first industrial action of its kind in nearly three decades – in further evidence that the collapse in the oil price is taking its toll.

But as the low price of crude continues the crisis is affecting other sectors, demonstrating how critical the industry is for the economy. 


From FTSE satellite technology firms to health care specialists, a wide variety of businesses are starting to feel the pinch.

Aggreko shares tumbled last month after half-year sales fell to £685m from £1.5bn, a slump that the temporary power supplier blamed on the oil crisis.

Businesses that produce power, such as Aggreko, should look like they would benefit from a fall in oil – because it helps to reduce their costs.

But Aggreko has suffered because it supplied power to remote locations such as construction sites and mining operations. 

Due to a reduction in the amount of exploration in the oil and commodities sector, demand for its power has reduced.

The low price of crude means North American oil and gas producers have had to scale back production at existing sites and mothball new projects.

These remote sites have previously relied on Aggreko to provide the power to run the heavy machinery.

Aggreko chief executive Chris Weston said: ‘The oil price needs to be a little bit higher, and higher for a reasonable period of time – three to six months – before you begin to see more drilling and production activity in areas where there is no power and therefore they need our services.’

In North America, revenue was down 20 per cent, driven by a decline in upstream oil and gas, which is the drilling side of the business, and also in petrochemical and refining. 

Private health insurance provider Bupa is one of the more unlikely companies to have found itself suffering.

Last month it reported profits of £185.7million in the six months to June 30, down 37.6 per cent from £297.5million a year earlier. 

Bupa said this was partly due to its corporate clients in the oil and gas industries cutting back on private healthcare for their staff and having less staff after announcing job cuts to keep costs down.

Chief executive Evelyn Bourke said: ‘Globally, corporate oil and gas contracts have suffered as a result of the falling oil price, resulting in reduced revenues and profits. While oil and gas firms still see the benefit of having cover for employees, they are reducing some of the benefits.’

Firms with exposure to oil-rich nations are also feeling the squeeze. InterContinental Hotels Group said bookings in the US and Saudi Arabia have slipped. 

It warned that oil executives had cut back on travel and there were fewer bookings from workers, many of whom had lost their jobs. 


IHG saw revenue per room fall 6.3 per cent in the oil producing markets of Texas, Oklahoma and North Dakota and down 8 per cent in the Middle East earlier this year.

Banks have also been exposed to the oil sector and one of the worst hit is Standard Chartered.

The London financial giant is halfway through 15,000 job cuts. Its first-half profit was down 57.4 per cent to £671.1million.

The bank makes money by lending to firms that dig up commodities, from oil to iron ore.

Once the commodities sector wobbled, Standard Chartered reduced its exposure. This has meant it is not lending as much.

But it hasn’t been bad news for everyone. With petrol prices cheaper, consumers are spending the money they would have used to keep their cars running in shops or on holidays, boosting the retail and leisure sectors.

One curious beneficiary has been satellite maker Inmarsat, which uses technology to connect planes, ships and people in remote areas.

Sales of its internet connections for oil tankers boosted its half-year trading. Oil tankers have wanted to cut costs and use the most efficient routes in order to lower costs.

BY using Inmarsat’s technology they are able to decrease their fuel use. Inmarsat’s revenues for the three months to June 30 increased 6.1 per cent to £250million following contract wins.

Chief executive Rupert Pearce said connectivity is seen as a basic requirement with ‘the return on investment in broadband communications being recognised by ship and rig operators’.

For some firms the oil price collapse has been a mixed blessing. The airline sector has seen cheaper jet fuel, as the costs are gradually passed on from oil producers.

But British Airways owner IAG on the flip side of this it has been hit by a slowdown in corporate travel. 

The group said it had seen reduced demand on routes to oil-based economies in Africa, including Nigeria and Angola again because oil executives are no longer jetting off across the globe.

The price of the black stuff is expected to recover, but the days of $100 oil are not likely to ever return, so the firms dealing with cheaper oil will have to toughen up and adjust.

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