BDO survey shows effects of declining oil prices

By Emily Aasand | December 02, 2014

A drop in crude prices starting in June has shifted the focus of several oil and gas industry executives, according to a new report from BDO USA LLP.

According to the BDO 2015 Energy Outlook Survey, BDO USA LLP’s annual survey of 100 U.S. oil and gas CFOs, 45 percent of CFOs expect low oil and gas prices to be their greatest financial challenge in the upcoming year, a 55 percent increase over people expressing the same concerns in last year’s study. In the survey, BDO also found that the number of CFOs attributing oil price declines as the top factor inhibiting growth increased by roughly 68 percent over last year’s numbers.

“The past six months have seen the oil markets return to the volatility that has historically characterized the industry,” said Charles Dewhurst, partner and leader of the natural resources practice at BDO. “However, while headlines may be saying these price declines herald the end of the shale boom, U.S. companies have been preparing for a return to fluctuations and are well-equipped to navigate through this transitional period.”

Only 37 percent of CFOs surveyed expect global demand to increase in 2015, a 43 percent decrease in the number of CFOs expressing similar sentiments last year, according to the study.

“Nearly one-third of CFOs say they will pursue cost reduction programs to improve value for stakeholders, while 56 percent say they will cut costs and seek efficiencies in an effort to remain profitable in 2015,” the company said.

The study also found that CFOs are more optimistic about natural gas, but “remain wary,” stating CFOs, in general, expect natural gas production to grow in 2015. It also found executives proactively focusing on environmental regulation to reduce risks as well as outline legislative and tax concerns.

“Legislative and regulatory changes will always be top of mind for industry executives, as the oil and gas industry is one of the most heavily regulated in the country,” said Clark Sackschewsky, a partner with BDO’s natural resources practice. “Taxes will always be a particular concern, as incentives like the IDC are instrumental in fostering industry growth and, by extension, economic growth.”

The BDO USA 2015 Energy Outlook Survey, a nationwide survey conducted by Market Measurement Inc., collected data from September through November.

Although U.S. oil production had a robust year, crude prices have dropped quite noticeably since June 2014 and has several industry executives skeptical of an end to this declining market trend.

A drop in crude prices starting in June has shifted the focus of several oil and gas industry executives, according to a new report from BDO USA LLP.