There is no way around it. The price of gas and oil is dropping, and that is affecting a number of businesses around the world. According to CSL Stockbrokers Limited, there is a chance that companies in the Nigerian gas and oil market may be considering consolidation as a means to become more effective and to lower their costs.
The prices are affecting companies all around the world, and not only those directly in the gas and oil industry. Companies such as US Steel have already started laying workers off because of the dropping oil prices. Others directly involved in the field, as well as those that have tangential connections could find that they also need to follow suit and reduce their workforce.
Is Consolidation a Good Option?
With the price for a barrel of oil hovering between $55 – $65 right now, many companies in the field are understandably nervous. They are looking for ways to cut their costs and continue making money wherever possible. Consolidation is something that will come up inevitably, and some of the smaller companies out there could well be swallowed up by some of the bigger fish. If this does happen, it could offer some advantages for both the larger and smaller companies. However, it also reduces some of the competition, and this may ultimately be a bad move. Of course, right now, it’s all about survival for these businesses.
How Long Will the Low Prices Last?
Of course, this is the big question. A month or so ago, many experts actually thought that the prices would stay at $80 a barrel. Then, they said $70, and then $60, yet the prices kept on falling, and then back up yet again. Will they go lower? It truly is difficult to say, but if you’ll excuse the pun, this is likely the bottom of the barrel. It can’t drop much further and still be sustainable. If it does, expect to see more layoffs, and more companies considering consolidation as a means to stay afloat.
Many feel that the prices will start to rebound in 2015 and that demand will grow to the point where the prices will fully recover. It is still too early to tell. One thing that would help immensely is if OPEC would reduce their output. However, as of now, they are staunchly against this and are trying to force other nations to cut back instead.
About Oil Works Inc.
Oil Works, Inc. is a complete drilling rig equipment manufacturer and service provider based in the Permian Basin for over 20 years. OWI’s product and service offerings include Derricks, Substructures, Drawworks Manufacturing, Mud Systems, Rig Walking Systems, Power Generation, Control Systems, Iron Roughneck Service, Quincy Air Compressors. We are a complete Drilling Equipment Manufacturer and build to API and ISO standards. OWI is also proud to offer 24/7 Service and Support.