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Commentary: Energy Sector Must Return to Basics

Nick Butler writes in the Financial Times that “energy executives returning from their summer holidays face some hard choices. I know of at least three major oil and gas companies that have ordered full scale strategic reviews.”  

“The problem, for the companies and for investors, is that prices are falling. The Brent oil price is down 15 per cent since June and by the time you read this could have slipped below $100…Natural gas and coal prices are also down.”  

After providing prescriptions for turing things around, the piece concludes: “For companies which are already relatively efficient and in control of their costs the ice bucket will be relatively painless. The best CEOs and finance directors will have a list of the cuts which can be made in their back pocket. For others the process will be difficult and for some, deeply destabilising. Projections of future price rises can become embedded in corporate culture to the point where executives believe that they can’t be wrong and that it is the “market” which is making the mistake. But the pain is necessary and much better for the company than relying on optimism and a faith-based analysis.”

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