The global economy has stabilized or is improving, which will lead to more investments and job growth in 2012 for the oil and gas industry, according to a majority of energy executives surveyed by Ernst & Young LLP.
In its fifth Global Capital Confidence Barometer survey, the energy consultancy said more than half of the 92 energy companies responding were optimistic about the coming year. Only 4% said they were in “survival mode.” The biannual survey by Ernst & Young’s Economist Intelligence Unit questions senior executives from large companies around the world. The oil and gas subset of the survey gauges corporate confidence in the global economic outlook and identifies boardroom trends and practices.
“In the wake of the collapse in 2008, oil and gas companies worked hard to reduce financial risks and work more efficiently,” said Jon McCarter, the consultancy’s Oil & Gas Transactions Leader. “Consequently, we are seeing stronger balance sheets, lower costs and an increased focus on investments making growth possible.”
Investing still is the No. 1 focus for 2012, the survey found.
“Asked if they expected to make an acquisition in the next year, 48% of the oil and gas respondents responded positively; in comparison, only 41% of the broader global sample responded positively,” the survey noted. Of the five regions most likely to see investments, the Asia Pacific region topped the list followed by North America, Middle East and Africa, Western Europe, and Latin America. More than one-third (37%) of those responding expect to sell assets in the coming year with the “main driver of the divestment activity focused on core assets.”
One-third of those surveyed plan to hire new employees in 2012, while 60% “intend to maintain the current workforce size,” said the Ernst & Young survey.
Cash and noncash equity “continue to be the primary sources for financing deals with 50% of oil and gas industry respondents planning to use no debt to finance deals versus 25% of the broader population financing deals with cash and equity.”
Meanwhile, environmental risks are considered the “biggest threat to the growth agenda of oil and gas respondents, ranking ahead of banking/financial reform and taxes, which the broader global sample of respondents had seen as greater threats,” said the survey. “Environmental regulation is a primary concern among developed and emerging markets.”
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