Portfolio under declining oil price environment

Abstract

Today, many of oil and gas companies are putting tight reins on capital spending. High international oil price for the past few years allow E&P Sector to invest in the project which requires innovative technical solutions such as deep water, unconventional and integrated LNG project throughout the world. At the same time, these are well known as high capital intensive project with high level of uncertainty and risk. But oil price has been declining from middle of 2014. The plunge was sharpest since 2008 Lehman Shock and it hasn't shown signs to rise back. The high volatility of the oil price exerts significant impact on the E&P Sector. It affects not only Total global oil and gas supply/demand growth but also numerous distinct Investment activities. Resulting stock price decline, experience of substantial pressure related to credit facilities, downward pressure of credit rating from agency, slow down of merger and acquisition (M&A) etc. This paper addresses multiple challenges that E&P companies and industry are facing by the declining of oil price. Furthermore, describes business model in one of largest “Sogo Shosha” in Japan to survive low commodity price environment.