— Investor Interest in E&P Continues to Grow, Despite Volatile Economic Outlook —
CHICAGO–(BUSINESS WIRE)–According to data released today by BDO USA, LLP, one of the nation’s leading accounting and consulting organizations, chief financial officers (CFOs) at U.S. oil and gas companies expect better access to capital in 2012. This year’s survey found a 260 percent increase in CFOs who reported feeling “much better” about the prospect of accessing capital in the next year (18% vs. 5% in 2010). Only ten percent of CFOs cited accessing capital as their greatest financial challenge (down from 22% in 2011).
“CFOs have repeatedly indicated that their companies are structuring pay opportunities consistent with key performance indicators. Given the industry’s strength and the returns being realized by investors in 2011, it should come as no surprise that executives are expecting a commensurate compensation increase”
“Confidence in the ability to access capital has grown steadily over the past year, allowing management teams to advance discovery and development plans,” said Charles Dewhurst, partner and practice leader in the Natural Resources industry group at BDO. “This confidence has led to a notable uptick in investor interest, particularly with private equity investment in the oil and gas industry.”
While the study shows a positive capital outlook for next year, CFOs are concerned over legislative changes and the politically-charged environment in which they will be debated. Fifty-one percent of CFOs believe that legislative changes will be the greatest factor inhibiting growth in the oil and gas industry during 2012, and 38 percent see legislative changes as their organization’s greatest financial hurdle. Partisan politics in Washington D.C. are partially to blame for this anxiety, with 29 percent of CFOs noting it as their top political concern for the next year. The other major political concerns weighing on the minds of CFOs are tax proposals targeted at the energy industry (39%) and the federal budget deficit (27%).
Despite these sentiments, CFOs remain confident in their own organization’s ability to withstand a volatile market and many are investing in more competitive strategies than were seen during the recession. More than half (54%) are projecting an increase in the number of rigs operated by their company.
These findings are from the BDO 2012 Energy Outlook Survey, which examined the opinions of 100 chief financial officers at U.S. oil and gas exploration and production (E&P) companies. The survey was conducted in November 2011.
Additional findings from the BDO 2012 Energy Outlook Survey include:
Compensation is tracking with industry growth. More than half (52%) of CFOs reported that in 2011, executive compensation was tied more closely to performance than in 2010 (44%). Forty-seven percent of CFOs expect their own compensation to increase in 2012, compared with 20 percent in last year’s survey; 44 percent expect their pay to remain steady. Year-end employee bonuses are largely holding steady, but 28 percent of CFOs expect bonuses to be “larger” or “significantly larger” than 2010. “CFOs have repeatedly indicated that their companies are structuring pay opportunities consistent with key performance indicators. Given the industry’s strength and the returns being realized by investors in 2011, it should come as no surprise that executives are expecting a commensurate compensation increase,” stated Lance Froelich, senior director in BDO’s Executive Compensation practice.
Volatility in the Oil Market Remains a Top Concern
Sixty-four percent of CFOs believe the economy will have a negative impact on the demand for oil and gas in 2012. Additionally, fears over a double-dip recession are believed to pose the greatest risk to volatile oil prices (35%), followed by turmoil in the Middle East (27%), economic growth in Asian countries (22%) and worries over the European debt crisis (7%). “While most organizations are better prepared for a recession than they were in 2008, CFOs are still anxious about another major dip in the economy and the implications of continued international unrest,” said Dewhurst.
BDO is the brand name for BDO USA, LLP, a U.S. professional services firm providing assurance, tax, financial advisory and consulting services to a wide range of publicly traded and privately held companies. For 100 years, BDO has provided quality service through the active involvement of experienced and committed professionals. The firm services clients through more than 40 offices and more than 400 independent alliance firm locations nationwide. As an independent Member Firm of BDO International Limited, BDO serves multinational clients through a global network of 1,082 offices in 119 countries.