Survey: rise in optimism

Feb. 22, 2010
During a time when much attention is focused on the global recession, unemployment, and other gloomy reports, it was nice to see positive news recently.

During a time when much attention is focused on the global recession, unemployment, and other gloomy reports, it was nice to see positive news recently.

This month, accounting firm Grant Thornton LLP released the results of its 2010 survey of upstream US energy companies. The results are optimistic for the upstream industry compared with last year's report.

This eighth annual survey was conducted from November through December 2009 with more than 100 responses from senior executives of independent producers, service companies, and transport firms. Of the respondents, 73% were E&P companies, 17% service firms, and 10% gathering and transportation companies.

The companies that responded had average yearend 2009 total assets of $540 million and average 2009 fiscal year revenues of $245 million. The following are key findings in three areas.

Employment, spending

The direction for employment has turned upward from the previous survey. Fifty percent of respondents expect higher employment levels at their companies in 2010, compared with 35% in 2009.

Results were similar for the industry as a whole (see chart). Seventy-five percent believe employment levels in the industry will rise or hold steady in 2010. Only 11% expected this to happen in 2009. An increase in employment is projected for 2011 and 2012.

The survey also found that 78% percent of respondents believe conditions have improved or will have improved enough by the end of 2010 to consider the US economy's recession to be over.

Eighty-five percent of respondents do not expect to encounter difficulties hiring and retaining employees over the next year. Those who do expect difficulties find engineers and land professionals to be their primary concern.

Sixty-seven percent of survey respondents expect an increase in their US spending in 2010, compared with 32% in 2009. Ninety-three percent expect no change in capital spending outside the US this year.

For 2010, survey respondents indicated forecast natural gas and crude oil prices, projected demand for natural gas, and availability of capital and financing as the most important factors in capital spending decisions. Availability of drilling rigs and skilled personnel and tax impacts were the least important.

Issues, opportunities

The survey found successful exploitation of resources, mergers and acquisitions, and operating efficiencies provide the greatest potential for enhancing company value and growth. Retaining and attracting people and asset sales had the least potential.

Incentives to increase US drilling, conservation, and OPEC actions were the most likely ways to reduce energy prices for the US consumer. Use of alternatives to hydrocarbons was at the bottom of the list.

Respondents would prefer areas of short-term government focus to be on opening up drilling in onshore federal acreage, clean coal as an alternative fuel source, and tax credits to increase research and development. Long-term, drilling in the Arctic, biomass as an alternative fuel, and grants for research and development are the preferred areas of focus.

The top concerns in the industry today did not change from 2009. Uncertain natural gas and crude oil prices and obtaining capital were the most commonly cited problems.

Respondents believe the US is strong in capitalizing on technology and attracting and retaining talent. Eighty percent of respondents think the US needs to focus on achieving more energy independence.

Respondents would like to see their corporate and individual leaders concentrate on promoting natural gas as a viable source of energy, more dependence on domestic exploration and production, and legislation that promotes the energy industry instead of imposing additional limitations.

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