EY - Portfolio management in oil and gas

Portfolio management in oil and gas

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Today’s volatile oil and gas market has resulted in decreased prices. Companies need to respond to the changing landscape flexibly, proactively and competitively by incorporating and preserving optionality in their portfolios.

Over the last several years, unprecedented events, including geopolitical upheaval and significant technological advances, have significantly altered oil and gas activity across the board. At the same time, many projects have struggled to get sanctioned or are still a long way from achieving full production. Amid all these factors, it is very difficult to predict the future state of the industry, making it even more important to have a flexible portfolio.

Price volatility is likely to move to the top of the risk agenda in 2015. Companies that are strong financially and able to readjust their business portfolio are more likely to “weather the storm” and thrive in any price environment.

What does optionality really mean for oil and gas companies?

Simply put, a company has optionality if it can quickly, effectively and efficiently shift its focus from underperforming businesses, assets and projects to better-performing ones that fit with its current strategy and enhance the overall value of the portfolio.

Leveraging optionality through active portfolio management

Active business and portfolio management is a critical link connecting corporate strategy, capital allocation, portfolio management and project implementation. Frequent and effective reviews help companies identify possible symptoms of portfolio inertia early and correct them before they significantly hinder business performance.

Five-step approach for managing portfolio

Five-step approach for managing portfolio