Confidence among UK North Sea oil and gas contractors is at an all-time low, according to a new industry report.
A survey conducted by Aberdeen & Grampian Chamber of Commerce, in partnership with the Fraser of Allander Institute and sponsored by law firm Bond Dickinson, found that four in five contractors surveyed feel less confident about their prospects than a year ago.
Only one percent of respondents said they are more confident than last year.
The survey also revealed the lowest level of firms working at or above optimum levels in the UK Continental Shelf since the survey began in 2004.
Only 16 percent of contractors reported working at or above optimum levels, down from 21 percent in the 2014.
Several waves of layoffs this year have also shaken confidence among North Sea contractors.
About 64 percent of firms have cut their workforce this year while only 14 percent of contractors boosted their headcounts, the report said.
Responses to the layoffs have been mixed across the sector.
About 54 percent of respondents said they believed the redundancies were a “strategic response to make the industry fit for the future.”
However, 58 percent of respondents said they also believe the level of redundancies have been “excessive” and place the sector at risk of losing staff with key skills.
With oil prices still hovering under the $50 per barrel mark, about 85 percent of respondents said they expect job losses to continue into the next year.
UK North Sea firms responding to the survey also reported several “unusual challenges,” the report said.
Four in five firms, or about 80 percent, said they are seeing an “abnormal increase in the number of projects being cancelled.”
Seventy-six percent reported seeing an unusual increase in the time taken to make procurement decisions and 45 percent of respondents said they have noticed a “particular spike in late payments.”
Contractors are beginning to explore alternative revenue streams to deal with the challenging economic environment, the report found.
Seventy-eight percent of all firms questioned expect to be more involved in decommissioning work in the next three to five years.
Firms except decommissioning experience, international experience and project management skills to be in high demand over the next three years.
“This is probably the most negative survey we have ever had and while there is little to be positive about in the short term, there are some glimmers of hope,”oil and gas partner at Bond Dickinson Uisdean Vass said.