From a high of around $115 a barrel in June 2014, to a low of around $35 in January 2016, the sudden and sustained crash in the oil market, despite recent increases, continues to cause pain for those operating in the offshore sector. For many participants in the market, survival remains the name of the game.
Whilst contractors who are managing to continue to operate in the offshore sector have had some time to adjust their business models and modes of operation to the new commercial realities, the radically different economic circumstances of recent years continue to manifest themselves in commercial scenarios quite unlike those experienced in the better times when the oil price was signi?cantly higher. In those benign conditions, contractors had the upper hand on pricing and could be relatively assured that their contractual counterparts would adhere to their commercial bargains. The concern rather was to avoid committing for too long, or on such terms as did not allow a contractor to bene?t from further upward movements in the market.
In this new era, however, contractors will commonly face quite different challenges. These can range from clients and other commercial counterparties facing ?nancial dif?culties which impact on their ability to meet their contractual obligations owed to contractors, to contractors’ own internal issues which are also the result (albeit indirectly) of the economic dif?culties of their clients.
Excerpted from Pratt's Energy Law Report. To read the full article, click on the PDFs linked below.