Credit capacity among top concerns for oil and gas companies

The accounting and consulting firm, BDO Seidman, LLP, released its findings from a study in which the organization interviewed 100 chief financial officers (CFO) at U.S. oil and gas E&P companies.

The BDO Seidman Natural Resources 2009 Outlook Survey was conducted in October and November of 2008. Most respondents (63%) expect to maintain their current levels of field personnel with 29% stating they will increase levels and 8% plan to decrease field staff.

Potential growth drivers for 2009 were identified as increases in demand both internationally and domestically. Others cited new production technologies (17%), adoption of alternative energies (12%), and increased oil and gas exploration (10%) as primary modes of industry growth over the next twelve months.

The report also shows only a portion of CFOs view access to capital (19%) and uncertain political climates (16%) as major barriers to international growth. Only 5% cited international tax or environmental regulations as a significant deterrent. Other financial challenges include recruiting or retaining skilled employees of which 12% of CFOs interviewed claimed this to be a problem in the coming year.

However, a majority (57%) of CFOs interviewed said that credit capacity restraints and access to capital would be the greatest financial challenge in 2009. Nearly a quarter (21%) placed lower oil and natural gas prices as the second biggest challenge. Three-quarters of the respondents (72%) expect the economic crisis in the U.S. to impact their ability to borrow money or to extend bank debt in 2009. Of those interviewed, only 26% reported delayed or terminated E&P projects in the last 12 months with 80% of those stating “lack of capital funding” as the cause.

Charles Dewhurst, a partner of the firm stated, “Energy companies have remained relatively unscathed by the downturn this year and continued with record profits. However, a storm front is gathering for 2009.” The survey was conducted as oil prices and demand continued to drop – and this volatility, combined with the state of the economy – has energy companies treading more cautiously, added Dewhurst.