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