LONDON, May 28, 2015 /PRNewswire/ -- Global oil and gas
companies must evolve their approach to portfolio management to
improve return on capital (ROC) and remain resilient in today's
increasingly challenging market, according to EY's Portfolio
management in oil and gas: building and preserving
optionality.
The report, the third in EY's Oil and gas capital projects
series, highlights how the average ROC of the top 10
international oil companies (IOCs) has dropped by 50% in the last
10 years.
Andy Brogan, EY's Global Oil
& Gas Transaction Advisory Services Leader, says:
"Over the last few months we've seen stakeholders demand even
greater capital discipline amidst ongoing oil price volatility and
geopolitical concerns. Companies have responded by divesting
non-core assets and postponing riskier and uncertain investments.
But active portfolio management alone can fail to improve returns.
More than ever before, companies must marry portfolio management
with flexible and adaptable operating and financial models."
Improving ROC depends on the speed at which companies can
identify and respond to opportunities and threats. Companies that
establish a portfolio with built-in flexibility, or optionality,
will be better positioned for success. Optionality enhances
companies' ability to manage risks and redeploy resources. It also
enables companies to reconcile the sector's long-term investment
horizon with sudden changes in the market.
Brogan says: "Moving forward, the world is going to be a more
volatile and unpredictable place. Companies that have
optionality can better manage their stakeholder's requirements and
deliver better returns."
The report identifies a variety of approaches to build and
preserve optionality given the long-term planning cycle inherent to
much of the sector's activity. It also identifies key leading
practices that can be deployed to improve performance in this
critical area.
Brogan says: "The drop in oil price came quickly and took many
in the sector by surprise. Companies have turned to portfolio
management to withstand this period of uncertainty, but it's those
who look ahead and embed optionality into their business models
that will come out on top. There will be winners and losers, and
the ability to respond quickly to unexpected market changes in
crucial. Companies can't afford to be caught unprepared in today's
competitive marketplace."
Notes to Editors
About EY
EY is a global leader in assurance, tax, transaction and
advisory services. The insights and quality services we deliver
help build trust and confidence in the capital markets and in
economies the world over. We develop outstanding leaders who team
to deliver on our promises to all of our stakeholders. In so doing,
we play a critical role in building a better working world for our
people, for our clients and for our communities.
EY refers to the global organization, and may refer to one or
more, of the member firms of Ernst & Young Global Limited, each
of which is a separate legal entity. Ernst & Young Global
Limited, a UK company limited by guarantee, does not provide
services to clients. For more information about our organization,
please visit ey.com.
This news release has been issued by EYGM Limited, a member of
the global EY organization that also does not provide any services
to clients.
About EY's Global Oil & Gas Center
The oil and gas sector is constantly changing. Increasingly
uncertain energy policies, geopolitical complexities, cost
management and climate change all present significant challenges.
EY's Global Oil & Gas Center supports a global network of more
than 10,000 oil and gas professionals with extensive experience in
providing assurance, tax, transaction and advisory services across
the upstream, midstream, downstream and oilfield service
sub-sectors. The Center works to anticipate market trends, execute
the mobility of our global resources and articulate points of view
on relevant key sector issues. With our deep sector focus, we can
help your organization drive down costs and compete more
effectively.
For more information, please visit ey.com/oilandgas.
Sarah Shields
EY Global Media Relations
+33 (0) 46 93 49 65
sarah.shields@fr.ey.com
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/oil-and-gas-needs-focused-portfolio-management-to-address-decade-long-decline-in-return-on-capital-300089670.html
SOURCE EY