Wintry Years Keep Oil Men Shivering
Byline: BRIAN O'CONNOR
A CHILL wind is blowing through the oil industry.
Before it dies, it could knock over a batch of vulnerable companies and force others to huddle together for shelter.
It might overturn a despot or two in the producer nations, which have a proclivity for despots. It might even tweak the tail of the mighty USA. And in Britain it threatens thousands of North Sea jobs.
The chill comes from a steep, two-year fall in crude prices. Demand faltered as Asia and then Latin America hit trouble, and supplier nations carried on pumping as if there were no tomorrow.
The resulting 55pc fall for the world's most traded commodity must have profound effects.
Ask investors. Explorers' shares have fallen two-thirds in a year, trailing the market by 65pc. Cairn Energy, the Bangladesh gas star which soared to [pounds sterling]1bn market value on the strength of one successful well, is worth just [pounds sterling]150m today, with its shares back from 635p to 88p. British Borneo, 520p 15 months ago, languishes at 91p.
Even giants are having a hard time.
The value of Shell, once a core holding for City funds, has been slashed by [pounds sterling]1bn a month over the past year.
Premier Oil, down from 51p in May to 11 1 /2 p, has a market value barely half its borrowings. Chief executive Charles Jamieson says: 'It is untrue to suggest any problems. We have good assets.' But such ratios tend to make the bankers more important than shareholders.
All explorers are counting their cash.
Lasmo, which reported losses of [pounds sterling]48m for 1998, has [pounds sterling]450m in the bank, though it also has [pounds sterling]1.1bn debt. Its fear is that if you have to go cap in hand to banks, you may emerge without your cap, shirt and various other garments.
Today's wise virgins are those who filled their lamps not with oil but with cash through share issues while the going was good. Even these are nervous. One chief executive says: 'We are all watching Enterprise and Lasmo. …