Leaders from the “Big Four” accounting firms—Deloitte, EY, KPMG and PwC—joined Hart Energy for a deep discussion on the ongoing energy transition and the different approaches to ESG within the oil and gas industry plus how COVID-19 is accelerating the digital transformation.
Speakers in this wide-ranging discussion include:
- Katie Pavlovsky, Global Energy, Resources and Industrials Industry Leader, Deloitte;
- Deborah Byers, Partner and Americas Industry Leader, EY;
- Regina Mayor, Global and U.S. Head of Energy and Natural Resources, KPMG; and
- Niloufar Molavi, Global Energy Leader, Partner, PwC.
Editor’s note: This interview was recorded on Sept. 1, 2020. Click here for Part One of our discussion with the “Big Four.”
Jump to a topic:
1:09—Different approaches to the energy transition
“It’s still early on and really this most recent year is perhaps the most ambitious year that we’ve seen in terms of targets set for low-carbon types of emissions,” Pavlovsky said.
2:55—BP’s strategy versus other supermajors
“I don’t think everyone is going to go in that direction because I think as Katie rightly pointed out there is a group of supermajors that will drive in a certain direction,” Mayor said. “Then there is another group that focuses more on decarbonizing the hydrocarbons because we still need fossil fuels. We cannot power the planet without them today.”
5:28—Luring investors back through ESG
“I don’t think there’s a company, whether you’re in energy or any other sector for that matter, that can any longer ignore talking about what they’re doing to contribute to the net-zero goals that have been set globally,” Molavi said.
8:27—No one-size-fits-all approach
“There’s not going to be a one-size-fits-all approach for the industry,” Pavlovsky said. “What I think is really critical here is they’re evaluating these different types of opportunities in conjunction with how they’re exploring sustainable, profitable growth.”
9:10—How the energy sector can regain trust
“Not only do you need to have those goals [and] show progress against those goals,” Byers said, “you also are going to have to maintain good returns to the shareholders.”
11:07—Focus on ESG new?
“I am having more of those types of questions with companies in the sector—quality of the data, quality of the reporting they’re doing and really thinking hard on about what they’re measuring themselves against,” Molavi said.
12:09—ESG in an operating model
“Number one, it’s definitely a hotter topic and board members are very vocal and active in talking with management about what we’re going to do,” Mayor said. “Number two, it’s how do you change your operations so that you’re fundamentally living the ESG commitments that you’re making. And then, number three, how do you report about that.”
13:13—COVID’s impact on ESG drive
“I was curious ... what was COVID going to do. Was it going to have any impact on diminishing what I saw as momentum associated with the BlackRock letter?” Pavlovsky asked in reference to BackRock CEO Larry Fink’s 2020 annual letter to CEOs. “In my view, it only seems to have accelerated, I think, some of the pressure.”
“Clearly digital capabilities were absolutely critical for any companies’ ability to pivot during the pandemic,” Mayor said. “We saw that those companies that were ahead from the digital footprint, digital services, digital channel to the marketplace had a much better method for pivoting. ... This has been the greatest test of digital resilience than the world could have ever imagined.”
“This has been just an incredible Petri dish,” Byers said. “If there is any silver lining—and [there’s] almost none with the pandemic—it has allowed companies to say what is possible.”
20:24—Final thoughts on the industry’s path forward
“You have an incumbent asset base,” Byers said. “You need to figure out how you get that asset base to tick all the boxes on ESG, how do you decarbonize and how do you show a growth story and return back to investors. I think that now you need to look at what the recovery scenarios are going to be.”
“Look, the last five years have been rough—2020 was the roughest of them,” Pavlovsky said. “Companies are cutting costs but just resurfacing that point that I think we’ve all made ... the key to investing in the infrastructure and in recognizing that the demand is going to increase and being ready for that is going to be a really critical path to growth.”
“One thing we’ve learned from this dual shock—the dual shock of COVID-19 and the oil price collapse for the industry—is that all those things that the industry thought they could never do. ... They have now demonstrated that in a very short period of time those are doable when you’re forced to,” Molavi said. “So, how do you take the learnings from that and truly be transformational.”
“Focus on the fundamentals,” Mayor said. “What shocks me is we came through the downturn in 2014-2015, we knew cash flow was important, we knew debt on the balance sheet was not a good thing... We have to, have to focus on the fundamentals and returns to shareholders while we pivot to what we know is coming—the energy transition.”
Don’t miss Part One of Hart Energy’s discussion with the “Big Four”
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