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Creating value in a downturn Energy Services Companies:

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Creating value in a downturn Energy Services Companies:
www.pwc.com/ca/energy
Energy Services Companies:
Creating value
in a downturn
To preserve value when oil and gas prices fall, energy services
companies need to look at their customer connectivity,
operations, capital structure, tax optimization strategies and
contracts to ensure shareholder value is maintained and the
company remains competitive. Along the way, you may need to
manage stakeholders’ expectations.
How can your company maximize value in the short term,
while creating a sustainable long term strategic business
model? How can service companies satisfy their cost‑cutting
exploration and production customers and respond to
price undercutting from competitors while maintaining
profitability? What can service providers do to maintain both
financial strength and business capability amidst unavoidable
reductions in volume?
We can help you tactically look at your business and
determine the most efficient way to navigate the downturn.
How can we help
Our team of professionals provide independent, objective advice
on business challenges you may have. To help you create value in a
downturn, we can evaluate your business to maximize shareholder value.
We can help you with:
• Identifying your operations and cost reduction options
• Modelling
• Reviewing your capital structure
• Working effectively with existing shareholders
• Optimizing your tax
nectivity
n
o
c
Opera
d
takehol ers
Creating
value for
stakeholders
Ca p
ital
tion
s
s
tru
Dealing wit
he
xi
gs
ts in
er
Tax
o
ation
miz
p ti
Cus
to m
• Maximizing customer connectivity
lling
re
M
ctu
e
od
Operations
• Working capital management and cash
retention
• Asset utilization strategies
• Supply chain optimization
• Workforce optimization
• Location optimization and consolidation
• Direct operating cost eliminations
Have you considered…
• Moving assets into other countries through
rental or sub-lease?
• Assessing your procure-to-pay cycle to retain
cash?
• Optimizing workforce productivity to enable
you to acquire your competitors?
Impact on
• Operating costs
• Workforce size and structure
• Working capital
Dealing with
existing
stakeholders
Capital structure
• Sale of non-core assets or a business unit
• Equity raise
• Debt raise
−− Convertible debt
−− Mezzanine debt
−− Bank refinancing
• Royalties
• Joint ventures
• Mergers to maximize shareholder value
Have you considered…
• The value of your non-core assets?
• Available capital funding?
• Strategic mergers to maximize corporate
value?
• What alternative has the best prospects for
near-term shareholder value?
Impact on
•
•
•
•
•
Shareholders (equity value)
Debt providers
Business plan
Balance sheet
Operating plan
Customer
connectivity
• Strategies for renegotiating with senior lenders
• Strategies for ammending terms with bond
holders
• Revised payment strategies for suppliers
• Strategies for negotiating relief from creditors
Have you considered…
• Cashflow forecasts/reporting and underlying
assumptions
• Forecasting upcoming debt covenants
• Strategies for addressing covenant breaches
• Extensions, forbearance agreements, waivers
of obilgations
• Evaluating dividend policies.
Impact on
•
•
•
•
Liqiuidity
Debt sutrcuture
Leverage
Viability
Tax optimization
Modelling
• Maximize revenue without breaking customer
connectivity
• Evaluate efficiencies to manage costs
• Increase market share through excellent
customer service
• Acceleration of deductions (eg. review of CCA
classification)
• Effective use of tax pools
• Use of tax credits to increase cash flow
• Model impact on stakeholder value in the
short, medium and long term
• Thorough understanding of downside risk and
probability of success
Have you considered…
Have you considered…
Have you considered…
• Reviewing your tax position to increase cash
flow
• Does your company qualify for Scientific
Research and Experimental Development
(SR&ED) refundable tax credits?
• How to maintain or increase your market share
while maintaining customer loyalty?
• How to work with clients to create win-win
situations while recognizing they might be in a
difficult situation?
Impact on:
• Long term revenue
• Customer loyalty
• Market share
Impact on:
• Cash flow
• Equity value
• How to protect your company from downside
exposure to price fluctuation?
Are there opportunities to hedge?
• How does volatility and uncertainty in
commodity prices, exchange rates, operating
risk of incident and technology impact your
business? How can you quantify these
impacts and make strategic decisions
accordingly?
• Can your capital structure withstand volatile
commodity prices and lower service volumes?
• What is the equity value under each scenario?
Which scenario maximizes stakeholder value?
Impact on
•
•
•
•
Internal rate of return
Covenants and capacity to repay debt
Free cash flow
Equity value
Contact us
Reynold Tetzlaff
National Energy Leader
403 509 7520
[email protected]
Cal Jacober
Calgary Managing Partner
403 509 7531
[email protected]
Clinton Roberts
Alberta Deals Leader
403 509 7307
[email protected]
Josh Matthews
Managing Director, Deals
403 509 6675
[email protected]
Matthew Wetmore
National Leader, Energy, Utilities,
Mining, Industrial Products
403 509 7483
[email protected]
Shawn Reain
Alberta Tax Leader
403 509 6373
[email protected]
Paul Darby
Partner, Deals
409 509 6677
[email protected]
Dave Bryan
Edmonton Managing Partner
780 441 6709
[email protected]
Adam Crutchfield
Partner, Consulting
403 509 7397
[email protected]
www.pwc.com/ca/energy
© 2015 PricewaterhouseCoopers LLP, an Ontario limited liability partnership. All rights reserved.
PwC refers to the Canadian member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. 4561-02 0515
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