The KPMG Global Energy Institute recently released the results of its annual survey of senior energy executives in the U.S. on issues facing the energy sector.
The results indicate changing business models, unchanged or even lower headcounts, and mergers and acquisitions are likely on the horizon in the coming years.
The survey was released as the oil and gas sector continues to rebound from lower commodity prices brought on by a global supply-demand imbalance, triggered by abundant hydrocarbon resources. The situation, which sent oil prices plummeting from more than $100/bbl to the upper $20s to about $48 today, ushered in a new way of doing business for companies that saw profits nosedive.
New technology, less spending and cost cuts are on companies’ agendas.
“The prolonged commodity price situation, technological advances and other disruptive forces have been shaking up the energy industry for some time now, creating challenges and opportunities for companies across all energy segments and operational activities,” Regina Mayor, national sector leader of energy, natural resources and chemicals for KPMG, said in the survey.
KPMG said its energy business outlook found that continued commodity price volatility is requiring energy companies in the U.S. to focus more on growth strategies and changing business models.
Here are some key oil and gas findings from the survey as reported by KPMG:
- 67% have completed or are launching a business transformation initiative;
- 73% believe the U.S. oil and gas headcount will either stay the same or decrease in the next two years;
- 92% say it is likely that their company will be involved in a merger or acquisition in the next two years; and
- 94% say it is likely that their company’s operating model will be disrupted in the next three to five years.
Executives surveyed also indicated their top strategies as well as the most significant barriers to growth for the industry. The results were not surprising, as many of the issues and priorities at the top of KPMG’s list are the same that company executives speak about during quarterly earnings updates.
Lowering costs, increasing cash flow from operations and focusing on growth were identified as the top strategic priorities; while volatile commodity prices, pricing pressures and regulatory constraints were deemed the most significant growth barriers.
And the survey results indicate that most don’t expect the U.S. economy to help matters.
Results revealed that only 38% of the executives surveyed believe the U.S. economy will improve in 2017. The majority, 49%, believe it will remain the same.
As far as commodity price predictions, most of those surveyed believe Brent crude oil will stabilize in spring 2017.
However, at 65%, the majority believe the price per barrel will be between $40 and $49, while 10% predicted between $50 and $59. At 2%, the more optimistic ones of the bunch forecast a price of between $60 and $69/bbl, while just as many forecasted between $20 and $29/bbl. The rest believed the oil price would be somewhere between $30 and $39/bbl in spring 2017.
Velda Addison can be reached at email@example.com.
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