Oil and Gas Execs Expect Increases in Cap Spending, Job Creation and M&A Activity

R&D Spend to Remain Flat While Regulatory Environment and Commodity Pricing Pose Challenges; Outlook for Crude Oil Will Remain Mixed

Jun 08, 2010, 09:00 ET from KPMG LLP

HOUSTON, June 8 /PRNewswire/ -- Oil and gas executives indicate that they expect capital spending and M&A activity to increase over the next 12 months, along with an expansion of their global workforce, according to the results of an annual survey conducted by KPMG LLP's Global Energy Institute.

In polling 780 senior executives from oil and gas companies, KPMG found that nearly two-thirds (61 percent) expect total capital spending by their companies will increase in 2010.  One-third (34 percent) anticipate capital spending to increase by more than 10 percent over 2009 level.  This represents a complete reversal from 2009 survey data when 65 percent said capital spending would be down.  

"After a few turbulent years, energy executives appear optimistic that economic conditions will continue to trend upward," said John Kunasek, executive director for KPMG's Global Energy Institute. "However, in this 'new normal' business environment, these executives are faced with underlying issues such as uncertainty around regulatory reform and a volatile global economy."

Regina Mayor, U.S. Oil & Gas sector leader for KPMG believes, "this spending outlook will be tempered by a strong need to better understand the incident in the gulf and what it will mean long term for offshore drilling, safety, and environmental protections."

According to the KPMG survey, almost half (47 percent) of the executives surveyed expect their companies to expand the global workforce over the next year and 63 percent of execs surveyed believe there will be more investment in/acquisition of U.S. energy companies.

When asked about the most significant challenges facing their companies in the coming year, respondents in the KPMG survey most frequently cite regulatory concerns, commodity pricing, and the economy as the most significant challenges facing companies this year.

Executive sentiment about commodity pricing is reflected in their estimates for where crude oil prices will close in 2010.  Fifty-five percent of the respondents think that the price-per-barrel of crude will close between $81 and $90, thirty-seven percent say between $91 and $100. Only nine percent believe oil prices will top $100 this year.

"We are hearing from our clients that commodity prices will remain volatile in the short run as the European economic and gulf oil spill situations work themselves out," said Kunasek.

Despite the anticipated increase in capital spending and the current trading price of oil, only 15 percent of executives say research and development investment in alternative energy projects will increase in 2010.  More than one-quarter (26 percent) believe wind projects will see the most investment followed by solar (12 percent), non-fossil natural gas (11 percent) and bioalcohol, biodiesel, chemically stored electricity and hydrogen all equal with six percent of responses.

Other findings:

  • Sixty-eight percent anticipate operating costs will go up over the next 12 months.
  • When asked which clean energy source will dominate in the next 20 years, gas led the field with 81 percent of respondents, followed by nuclear with nine percent respondents. While only 4 percent cited wind.
  • Fifty percent of execs believe the borrowing needs at their companies will increase in the coming year.


KPMG discussed these survey results, conducted through the month of April, during its Eighth Annual Global Energy Conference, the event for financial executives in the energy industry on May 25th and 26th at the Intercontinental Hotel in Houston. This year's keynote speakers were Newt Gingrich, former Speaker of the U.S. House of Representatives, and James Burgoyne, managing director and Global Leader of GE Energy Financial Services' Natural Resources.

KPMG's Global Energy Institute (GEI) has been designed to provide an open forum where industry financial officers, risk officers, internal audit directors, and tax executives can share knowledge, gain insights, and access thought leadership about key oil and gas or power and utilities issues and emerging trends.  It offers pioneering ideas and innovative tools that help organizations apply rigor to compelling, real-world business and energy issues. GEI interacts with their members through a variety of channels, including Web-based videocasts, podcasts, conferences, share forums, and a web portal, www.kpmgglobalenergyinstitute.com.


KPMG LLP, the audit, tax and advisory firm (www.us.kpmg.com), is the U.S. member firm of KPMG International Cooperative ("KPMG International.")  KPMG International's member firms have 140,000 professionals, including more than 7,900 partners, in 146 countries.



Manuel Goncalves




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