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East Africa: Funding Challenges As Oil Prices Stay Low

East Africa: Funding Challenges As Oil Prices Stay Low

Companies licensed to explore crude oil and natural gas in East Africa are struggling to get funding due to the decline in commodity prices.

Since oil prices declined from mid 2014, several companies are negotiating for extension of exploration.

PricewaterhouseCoopers (PwC) said most of these companies had based their projections on oil prices of more than $80 per barrel.

"The lower oil and gas price has led to players in the industry redesigning and adjusting their existing financial and forecasting models based on the new dynamics within the industry," said the consulting firm.

Expectations

Ninety-three per cent of respondents PwC talked to expect a barrel of oil to cost $50 to $80 in 2015. Ninety per expect a price range of $60 to $90 in 2016. Eighty seven per cent of the respondents expect $60 to $90 in 2017.

It has become more difficult for firms to find foreign investment with investors who have been holding onto oil and gas sector shares over the past year feeling some pain with stocks down by as much as 30 per cent.

Foreign investors often take a long-term approach that focuses on buying quality stocks at low prices, especially if they are trading at a valuation that is lower than that of similar companies.

The sector is trading below historical valuation levels but with oil prices starting to rise, investment could start to flow once again from industry investors who believe the stocks offer a good opportunity for rewards in future.

Kennedy Senelwa, Special Correspondent
Copyright:
All Africa
Published on:
August 17, 2015
Source url:
http://allafrica.com
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