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Industry Leaders More Optimistic, Survey Shows

Although a recent survey of U.S. oil and gas executives shows that half expect to increase employment levels this year, only a handful think the economic recession has ended. However, their outlook for gas prices has improved and optimism is generally up from the year-ago survey by the same firm.

Nineteen percent of those polled in Grant Thornton LLP's eighth annual Survey of Upstream U.S. Energy Companies said they expect the spot price of Henry Hub natural gas will be high enough to support more than a 20% increase in drilling activity in 2010, which is an increase from 4% holding the same view for 2009.

According to the survey, average prices expected for natural gas are $5.20/Mcf in 2010, $5.85 in 2011 and $6.37 in 2012. For oil the price expectations are $76.20/bbl in 2010, $82.08 in 2011 and $89.13 in 2012.

In an introduction to the survey results, Swift Energy Co. President and Independent Petroleum Association of America (IPAA) Chairman Bruce Vincent touted natural gas.

"One trend shaping our nation's oil and gas industry, which IPAA is working hard to explain to our political leaders, is the leading role natural gas must play in moving America to a cleaner energy future and strengthening national security by limiting our dependence on foreign energy," he said.

Two-thirds believe that conditions will improve enough during 2010 for most business leaders to consider the recession to be over (34% said in the first half of 2010 and 33% said in the second half of 2010). In addition, 71% said they believe the recession will end in 2010 for the upstream sector and 65% for service companies. Only 11% said that they believe the recession has already ended for the U.S. economy, 7% for the upstream sector and 1% for service companies.

Reed Wood, who heads the firm's energy practice, said respondents to the latest survey were optimistic. "It was convincingly evident in their outlooks for prices, capital expenditures and employment." This reflects an improved outlook from last year's survey (see NGI, Feb. 16, 2009).

While only one-third of the respondents expect an overall increase in employment for the industry as a whole in 2010, half indicate that that their companies would increase employment levels. The numbers for 2011 are more promising, with 74% of respondents saying that they expect industry employment to increase and 56% expecting their own companies' employment to increase.

Wood said the survey results and conversations with industry executives suggest that "the upstream industry experienced increased cash flow during the second half of 2009 and more favorable interest in their domestic capital-intensive projects requiring highly trained and experienced personnel. Continued stabilization and improvement of the key drivers should result in 2010 as a strong beginning of hopefully another extended recovery for the industry and the U.S. pursuit of less dependence on foreign resources."

Additionally, according to this year's survey:

The survey period was from last November through December and included more than 100 responses from senior executives at independent oil and gas exploration and service companies.

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