The price of rolling out the barrel

This month, business development and marketing manager Lisa George, PR account executive Gillian Wright and myself had something worth getting up extra early for: Scottish Business Insider’s Aberdeenshire Top100 Business Breakfast at the Mercure Ardoe House Hotel and Spa.

It was the 30th annual ranking, based on company turnover and profit, and not one to be missed in light of oil prices falling by more than half since last summer with the price of Brent crude now below US$50 a barrel.

Nonetheless, Aberdeenshire was deserving of an event in its own right with an increasing number of companies in the area and a large proportion represented in Scottish Business Insider’s flagship Top500.

The highly anticipated morning kicked off with a full cooked breakfast (kudos to Miss George who opted for healthy fruit and muesli) and as we digested the programme it was clear we had more than bacon and eggs to look forward to.

Professor Bell, Professor of Economics at the University of Stirling, shared facts on the economics of Scotland, having recently been supported by the economics of constitutional change in Scotland. For a ‘words’ gal (and night owl) you’ll be pleased to hear his presentation had me captivated throughout.

Professor Bell showed that, despite the challenges ahead for the energy sector, 75% in this year’s Top500 business listing were oil and gas companies, with Total Upstream UK reporting a £602million profit for the year ending December 2013. He also highlighted that oil and gas supply continues to grow whilst demand is declining however the million-dollar question of what’s next for the oil price was not directly answered.

Familiar to the North East and beyond, Wood Group chief executive Bob Keiller, who completed the US$1billion sale of PSN to Wood Group in April 2011, was first of the panel to speak. He had a clear message: production will not stop but investment decisions will be impacted.

Andy Willox OBE, Scottish Policy Convenor, Federation of Small Businesses revealed that 65% of small Scottish businesses suffer from late payment.

At this, it was highly appropriate for Alfie Cheyne, the chief executive of ACE Winches, to offer some insight with his strong collaboration message.

Alfred Cheyne Engineering, the deck machinery specialist, featured in the Top100 with a turnover for the year ending October 2013 of £35.45million.

Aberdeen & Grampian Chamber of Commerce chief executive Robert Collier highlighted that oil and gas confidence was at a six year low. Mr Collier gave a go at predicting the oil price by saying “oil price will be above US$100 per barrel in the future and oil price will be below US$40 per barrel in the future”.

We had the pleasure of being joined by some guests from Douglas- Westwood, Inoapps and Pale Blue Dot, which prompted an interesting discussion on the Scottish economy from a mixture of sector perspectives.

I left the breakfast with an unsavory taste in my mouth – not because I didn’t enjoy it or because of the lovely breakfast Ardoe put on for us – but because I wanted a black and white answer.

I asked Fifth Ring PR account director and head of energy insight, Andrew Bradshaw, what he thought would happen to the oil price in the future and he provided a context that enabled me to think more rationally.

“Many more intelligent people than me have made predictions which have ended up wide of the mark as we have crashed through the US$80, US$70, US$60 and US$50 ceilings in the past six months, which is why any forecast has to be treated with the utmost caution” he said.

However Andrew said that we had recently seen a slow down in decline around the US$48 mark, which might indicate that we may not fall into the US$30 range. If we were to level out at around $48 to $50 per barrel, it has been suggested that we may see that price linger for at least the first half of the year as the current production over supply levels out, and that we may start to see a pick up in price in the second half of the year.

The rapid change which the industry continues to face since the summer of 2014 proves the future can be unexpected. One thing that appears to be certain is it’s a sector that’s rising to the challenge and adapting just as quickly.