U.S. Oil and Gas Poised for Growth

Price volatility in natural gas and crude oil markets is energy executives’ top concern and compliance as new industry regulations loom.

March 8, 2012
Manufacturing Group

Price volatility in natural gas and crude oil markets is energy executives’ top concern and compliance with new industry regulations looms, but industry leaders are generally confident in the coming year’s prospects, according to Grant Thornton LLP’s 10th Survey of Upstream U.S. Energy Companies.

The survey revealed that 77% of U.S. oil and gas senior executives believe new reserves found in the various shale plays in the U.S. shift or change the nation’s dependence on foreign oil. Sixty-three percent of respondents anticipate increasing their domestic capital expenditures in 2012, with most capital budgets exceeding 2011 levels by an average of 15% - 30%.

“Those participants that are positioned to manage the challenges of volatility and regulation are likely to experience a successful year in 2012,” says Rick Gross, Audit Partner and Energy Practice Leader.

The energy sector is one of the country’s few areas of job growth. As with years past, executives remain positive in their outlook on employment, with 71% expecting higher employment levels at their companies in 2012, compared to 61% in 2011 and 50% in 2010. “Many seem to believe that these hiring plans will exacerbate the war for talent, as a majority of our respondents this year believe their companies will have difficulty hiring and retaining top talent,” states Gross.

Concerning the regulatory environment, while 72% of respondents’ companies will be affected by the Dodd-Frank Act, nearly two-thirds (65 percent) have not begun to implement the documentation and reporting required by the law.

Additional industry issues and opportunities from this year’s survey include:

•    Respondents still believe that government incentives to increase U.S. drilling for oil and gas are the most effective way to reduce energy prices for the consumer.
•    While most respondents view alternative fuels as a long-term solution to improving environmental concerns, respondents indicated that clean coal is by far the most likely to be effective in the short term.
•    The greatest potential for enhancing company value: successful exploitation and exploration of resources, followed by operating efficiencies and mergers and acquisitions, the latter of which in 2011 reached almost three times the 2010 transaction total.