North America Energy Producers Facing Layoffs, Capital Spending Cuts

According to a report by the British consulting firm AlixPartners, North American Oil and Gas producers face a cash-flow deficit of $100 billion in 2016, with layoffs and deep cuts in capital spending needed for many of the continent’s exploration and production companies to survive.

WASHINGTON (SPUTNIK) — North American Oil and Gas producers face a cash-flow deficit of $100 billion in 2016, with layoffs and deep cuts in capital spending needed for many of the continent’s exploration and production companies to survive, according to a report by the British consulting firm AlixPartners released on Tuesday.

"Largely because of the success of unconventional drilling in North America and the economic slowdown in China, this downturn could be one of the most severe and prolonged ever," AlixPartners Managing Director Dennis Cassiday said in a press release accompanying the report.

The major challenge will be to generate cash, said the seven-page report, which covers 130 publicly traded exploration and production companies operating in North America.

"While companies can go a long time without profits, they can survive only a short time without cash, the lifeblood needed by any type of company to pay its bills," the report noted.

Moreover, the report recommends multiple survival strategies focused on cash generation, including reductions in capital spending of up 50 percent, and aggressive efforts to further reduce labour costs, including layoffs.

The report predicts an increase in global oil and gas demand of just 1 percent to 1.5 percent for the year, with oil prices in the $45 to $65 range over the next several years.