Hunting the Margin: Pre- & Post Covid-19 Update – Strategic Implications of Continued Low G&O Handling and Processing Margins

1) Thin margins in G&O processing will continue. But the effects of Covid-19 show that the majority of the industry delivers those margins relatively reliably in times of crisis, which may generate more interest from outside investors.

2) Further consolidation in the global G&O chain may be driven by outright acquisitions or by more joint ventures and collaborations along the chain to build needed capacity, control overcapacity, and/or reduce risk per company.

3) G&O companies will continue to grow beyond their traditional sector into higher value-added businesses and/or emerging markets, but it will be an evolution in most cases rather than a revolution.

4) Covid-19 will impact margins and demand in the short- to medium-term and will likely also result in liquidity issues for some (likely smaller, non-diversified, or local) companies, raising counterparty risk, but potentially also providing consolidation opportunities.