One-third of U.K. oil and gas companies are at risk of running out of working capital or even going bankrupt in the current oil price downturn, reports have suggested. Companies have been taking evasive action to avoid this fate, slashing jobs and cutting costs.

Talisman Sinopec, which operates more oil fields in the U.K. North Sea than any other company, saw the writing was on the wall before the oil price crash.

The company operates 11 offshore platforms, an FPSO vessel and an onshore terminal at Flotta, in Orkney. It is also a partner in 46 oil fields.

Lauren McGregor, the company’s functional excellence coordinator, told the recent Share Fair in Aberdeen that the business needed to change even before the oil price slumped by more than half.

“At the start of 2014 we started the transformation,” McGregor said. “ We started that before the price of oil fell. It was driven by the joint venture failing to meet production targets.

“We looked to reduce costs, and we have had a ruthless focus on performance and delivery. In spite of us reducing costs, HSE performance has improved.”

She said the hard work has paid dividends. “We have a long way to go, but we have reduced opex by 24% and capex by 27%. As well as reducing opex and capex costs, we have increased production by 15%. We reduced our lifting costs by 34% in the period,” she said.

Talisman Sinopec increased output as it brought its Claymore compression project onstream last year, while production increased from Tartan and the Godwin Field, which ties back to the Arbroath platform. These projects helped increase production by 15%.

“We had to make some really difficult decisions in the business, and we made a 25% headcount reduction. We have had to battle the falling oil price,” McGregor said.

The 13 assets in the North Sea are all now responsible for their own performance, she said.

And the company was continuing to look for costeffective engineering solutions that are fit for purpose, she added.

“In 2013 we might have been asking for the gold-plated standard, whereas in 2017 and beyond we might be asking for the bronze-plated standard. We are changing our model,” McGregor said.

Other companies operating in the North Sea also are starting to see signs of improvement, and Nexen, a subsidiary of China’s CNOOC, is increasing spending in the region as its Golden Eagle asset reaches the anniversary of its first year in production.

Richard Orr, a drilling and completions specialist with Nexen, told the Share Fair, “The picture isn’t that negative from Nexen. The annual spend in 2016 is looking bigger than the previous two years.”

Nexen will be spending $590 million in 2016 compared to $452 million in 2015 and $557 million in 2014. “Every area of spend will be bigger than in 2015,” Orr said.

Let’s leave the last word to McGregor. “We are seeing the green shoots of recovery,” she said.

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