KPMG survey: energy execs to focus on growth strategies

By The Bakken Magazine Staff | July 15, 2015

The KPMG Global Energy Institute’s 2015 Energy Industry Outlook Survey, which polled nearly 200 senior energy executives in the U.S., found that more than half are changing, or planning changes to, their business models over the next two years. With the fluctuation in commodity pricing and a volatile environment, energy executives said many planned to focus on growth, reducing costs and increasing cash flows in the upcoming years.

The 2015 Energy Survey Outlook found that 53 percent of oil and gas executives believe the price of Brent Crude oil will stabilize by the end of the year, however, 35 percent think prices will continue to fluctuate into next year. Nearly 45 percent believe Brent Crude price per barrel will average $50 to $59 for this year, while 24 percent think the average price will reach $60 to $69 per barrel. These predictions are a significant change from last year’s survey results, where 94 percent of all respondents expected the price of oil would be $100 or higher.

“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,” said Regina Mayor, advisory industry leader for energy and natural resources at KPMG LLP. “Companies are taking necessary actions to drive pressures and remain competitive in this environment.”

According to the survey, 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 and budgeting management tools; changing service delivery models, and optimizing inventory and repair costs.

“In order to achieve growth in this challenging environment, energy companies need to be agile and take a 360-degree view of their businesses, which will require many to make significant changes,” said John Kunasek, national sector leader for energy and natural resources for KPMG LLP. “While managing costs is still important, these companies also need to identify ways to drive growth and innovation across their organizations.”

The survey found that more than 50 percent of oil executives surveyed plan to allocate capital over the next two years to acquire a business, expand facilities or transform a business model. Of those, 76 percent expect to see their organizations’ headcount increase or stay the same over the next two years.

“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.”