Restructuring in Times of Uncertainty

Restructuring in Times of Uncertainty

The oil and gas industry has faced no shortage of challenges in recent years. However, few could have predicted both the breadth and depth of the headwinds it now faces. Beyond the ongoing issue of falling prices driven by softness in demand, the subsequent OPEC-Russia fallout in March and the ongoing impact of the global pandemic have spiked industry tensions. The combination of events has left industry operators, investors, creditors, and other stakeholders weighing their options. Many executive teams have already moved forward with restructuring strategies, including filing for bankruptcy or cutting costs. More are expected to follow. Below are some best practices from formidable industry leaders and advisors who’ve successfully navigated similar storms in the past.

Build a Coalition

Developing an effective strategy, as well as executing it, requires accounting for multiple viewpoints to capture internal and external dependencies and considerations. Very rarely, if ever, will a management team be able to pull off a successful execution if it can’t trust or delegate tasks to subcommittees. CEOs should ensure those chartered with leading the restructuring effort are diverse in functional experience and domain expertise, which brings us to my next recommendation.

Details Matter

The oil and gas industry always requires a significant appreciation for nuance whether you’re managing a cross-border transaction or implementing operational processes in compliance with local regulations. This need for digging into the details is even more acute when considering the engineering of a restructuring. Management teams should actively engage specialist financial and legal advisors, along with other subject matter experts, at the onset of planning. Restructuring is almost never as simple as an asset sale.

Time is of the Essence

If recent weeks have taught us anything, it’s that priorities can change quickly and there’s never a shortage of hot button disruptions. Management teams will almost certainly find themselves best positioned for success if they allow for adequate timing in planning for multiple scenarios and contingencies. Whether it’s a divestiture, carve-out, Chapter 11, or some combination thereof, early planners will almost certainly reap the benefit of more options to select from and greater confidence in attaining a financial turnaround through restructuring.

Communication is Key

Restructuring requires definitive and transparent guidance within the management team and among project leads when there are decisions to be made. This is a well-accepted leadership tenant during times of uncertainty. However, it’s important to ensure this clarity and consistency in communication extends more broadly and strategically internally and externally. Employees should be periodically briefed with appropriate talking points to avoid unnecessary speculation or unease about the business’s health – a common phenomenon that can develop if an information vacuum exists. The same holds true for communicating to critical vendors.

Corporate oil and gas restructuring can be complex. Leaders who build strategies based on diverse collaboration, exacting plans, and effective and timely communications, will reap the benefits of increased productivity and, ultimately, a faster business performance turnaround.

Author Profile
Vice President of Sales -

Nicholas Renter is Vice President of Sales for Datasite, formerly known as Merrill Corporation, a leading SaaS provider for the M&A industry, empowering dealmakers around the world with the tools they need to succeed across the entire deal lifecycle.

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