Velda Addison, Hart Energy
If a recently released survey is any indication of what the near future could hold for the oil and gas industry, tomorrow is looking a bit brighter.
More than 50% of the nearly 200 senior-level energy executives polled in a KPMG Energy Outlook Survey released in May indicated they plan to allocate capital over the next two years to either acquire a business, expand facilities or transform their business model. The survey also showed that 49% of the oil and gas respondents plan to create new growth strategies within the next two years.
Their responses come as tough market conditions force companies to think differently.
“The recent collapse in oil prices is an issue on the mind of every energy executive as it caused a ripple effect that has had profound implications across the entire oil and gas value chain,” Regina Mayor, advisory industry leader for energy and natural resources at KPMG, said in a news release about the survey. “Companies are taking necessary actions to drive improved near- and long-term performance and identify areas of greater efficiency to adapt to market pressures and remain competitive in this environment.”
But as companies take steps needed to survive and thrive, they must also remember that today’s decisions could impact the future.
Technology gains in the E&P sector have made huge strides, growing oil and gas production to historic highs only to be slowed as lax demand and abundant supplies impact commodity prices and ultimately companies’ revenue. Companies have responded by becoming more efficient in oil and gas operations through use of technology and improved techniques, shedding assets that are not in line with growth strategies and reducing the workforce.
Worldwide energy demand, however, is expected to pick up. Companies need to be ready when it does.
As companies focus on improved technology, they should also focus on improving strategies concerning aboveground issues. If the U.S. lifts the oil export ban, how soon could production restart? How could other oil- and gas-producing nations respond? Where will U.S. produced hydrocarbons go, and how will they get there? Will there be enough workers to get the job done?
Good news is that most of the oil and gas executives surveyed, 76%, expect to see their companies’ headcount increase, or at least stay the same, over the next two years. More than a quarter of the respondents said they plan to increase headcount by more than 10%.
“This data shows that even in today’s challenging price environment, short-term staffing cuts are not as pervasive as headlines may indicate, and perhaps there is more job opportunity across the broader energy market,” said Mayor. “It’s not all doom and gloom in the oil sector; the companies that employ a variety of actions around supply chain, cost optimization and a well-designed core-operating model will come out of this downturn with a successful future.”
According to the release, the survey also showed:
- 53% of oil and gas executives think the price of Brent crude oil will stabilize by year-end, while 35% think prices will fluctuate into 2016.
- 45% of those surveyed predict Brent will average between $50 and $59 per barrel for 2015, while 24% think the average price will reach between $60 and $69.
“The volatile price environment is driving a strong focus on cost with most executives saying they are managing costs through better managing staffing or outsourcing; improving planning and budgeting management tools; changing service delivery models; and optimizing costs related to inventory and repairs,” according to KPMG.
The latest downturn has certainly taught the industry some better ways of operating. Hopefully, lessons learned will stick.
Contact the author, Velda Addison, at firstname.lastname@example.org.
Q&A: EnCap’s Thielemann: Private Equity ‘Survivors’ Poised to Thrive
2023-03-21 - EnCap private equity veteran Brad Thielemann discusses the role of private equity in traditional oil and gas investing — including the need to ramp up investments to meet demand — as well as its trajectory for financing the transitions ahead.
Baker Hughes, SLB CEOs Talk ‘New Energy’
2023-01-26 - Energy technology companies, including Baker Hughes and SLB, are spreading technological know-how while forming or strengthening partnerships to reduce greenhouse gas emissions and improve energy efficiency.
Market Power: Enverus GM Bernadette Johnson Takes Charge
2023-01-19 - In an exclusive interview with Enverus' general manager, Bernadette Johnson shares how the company is developing its power and renewables business and the benefits of diversity in the workplace.
Business Innovation Will Lead the Energy Transition Push
2023-03-14 - Industry experts argued a new business mindset is essential for bringing about the energy transition in a discussion during CERAWeek by S&P Global’s panel on scaling critical technology.
Dynamic and Diverse: Women in Energy Q&A
2023-02-09 - Leaders from Talos Energy and Rystad Energy discuss the changes the oil and gas industry has undergone—and the changes it still needs to make.