Norwegian energy companies such as Statoil, subcontractors for the oil and gas industry and other businesses that deal with the energy industry have had a very bad year so far. The oil price has dropped and investments have slowed down in the industry.
These developments are reflected directly on the Oslo stock Exchange, where energy shares have declined a total USD 27.5 billion from the beginning of the year and December 1st. The energy shares are now worth a combined USD 90.0 billion, according to calculations performed by the stock exchange for ShippingWatch.
Negative development will continue into 2015
According to analysts, the declining shares and negative atmosphere on the Oslo Stock Exchange are not just caused by the falling oil price. It is, to an even greater extent, expectations for the price next year that are making investors divest shares in Statoil and other businesses that depend on a certain oil price level.
According to Norwegian newspaper Dagens Næringsliv, analyst Kjetil Bakken of Carnegia has lowered his North Sea oil forecast to USD 70 in 2015, from previously USD 95. The bank also expects that Statoil will have a negative cash flow next year, which will require additional loan financing in order to maintain the current dividend rate.
Last week investment analyst Per Hansen of Nordnet described how oil companies - from exploration companies to service companies and subcontractors - have all been hit by the falling oil price - and how service companies in particular stand to take a beating.
"If the oil price stays at the current level 2015 will be a very cold investment year for oil service companies. If the price drops even further, we could see a collapse among subcontractors, depending on the force of the decline, and the speed and, not least, duration. On the other hand, a return to USD 90-100 per barrel - long-term - would be an extreme catalyst for the oil service industry. Subcontractors will remain dependent on developments in the oil price regardless," he says.
Big decline in November
Energy shares dropped 11.7 percent in November alone compared to the month before. This means that energy shares on the Oslo Stock Exchange now account for 34.3 percent of the shares on the stock exchange, while this figure stood at 43.6 percent at the beginning of the year.
Even though the energy shares are hit hard, there are in fact shares that are suffering more. The rig index on the Oslo Stock Exchange dropped 24 percent in November and has thus declined 52.9 percent this year so far. This development has hurt major players such as Seadrill.