BDO 2017 Energy Outlook
02 March 2017
“American oil & gas companies have demonstrated remarkable resilience amid the continued industry downturn this past year. Spurred by OPEC actions, oil prices are steadily climbing and the sector is regaining a sense of optimism that will hopefully come to fruition in 2017 and beyond.” — Charles Dewhurst, global leader of BDO’s Natural Resources practice.
Commodity Prices Thaw, Optimism Buds in 2017
In a market oversaturated with oil, financial success was in short supply for the U.S. oil & gas industry in 2016. But recent OPEC actions have generated renewed confidence, suggesting the sector could be poised for a turnaround. According to BDO’s 2017 Energy Outlook, energy CFOs are anticipating the industry could make strides toward recovery in 2017.
Oil prices hit the bottom of the barrel in 2016, exerting severe financial stress on U.S. energy companies. In fact, 2016 was the toughest year for survey respondents since the downturn hit in 2014. Fifty-eight percent of energy CFOs report project terminations and delays in 2016, up slightly from 53 percent last year. Low oil prices are the most commonly cited cause of project interruptions, noted by 91 percent of respondents reporting cancellations or delays in the past year. Prices dipped to $26.21 per barrel in February—a 75 percent decline from the market’s 2014 peak at $108 per barrel—and the lowest point since 2003, according to CNN Money. Other factors contributing to project interruptions in 2016 include federal and state environmental regulations (56 percent)—more than double the number reporting such interruptions last year—and lack of capital (49 percent).
On the heels of a difficult year, energy CFOs have a relatively optimistic outlook for 2017. Confidence is up that commodity prices will rise: 57 percent of CFOs predict a price increase for natural gas and 64 percent forecast an increase in oil prices. Sixty-three percent of energy CFOs believe increased oil & gas prices will drive overall industry growth in the year ahead, a slight uptick from last year (60 percent) and a remarkable resurgence from 29 percent in 2015. But what accounts for the returning sense of optimism among energy CFOs?