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 October 27, 2015 - 9:01 AM EDT
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Only the strong companies will survive the energy price environment

Grant Thornton and Hart Energy survey finds lower oil prices force energy companies to rethink strategy

After record prices in 2014, U.S. oil and gas companies have had struggles in 2015. Gone is the booming climate and record-setting growth, and, as a result, companies have adjusted strategy to deal with operational challenges such as budgetary constraints and capital considerations. This is according to the 2015 Grant Thornton LLP survey of U.S. oil and gas companies, conducted in partnership with Hart Energy.

When asked about the biggest operational barrier to their business, more than one-half of respondents said either budgetary constraints (35 percent) or access to capital (22 percent). Also, the capital waters are more treacherous to navigate than last year, with a majority (54 percent) of respondents finding access to new capital to be more difficult this year than last year. This one-two punch may suggest that well-capitalized companies with solid balance sheets and a strong asset position have the advantage in the new price environment.

“As prices fell in 2014 and early 2015, managements took the normal steps to deal with a price decline — capital budgets were cut, rigs were idled and operating costs were shaved,” said Kevin Schroeder, industry managing partner for Grant Thornton’s Energy practice. “In the spring, it looked like the industry might stabilize at a new norm of around $60 a barrel. But with prices falling again in the summer and hedges coming off — together with pressures on energy lenders — we’re in a period of greater stress. The industry has some real challenges ahead.”

Perhaps no single question reveals the changed circumstances of the industry as one about the biggest operational infrastructure challenges companies face. In the 2014 survey, finding and retaining qualified personnel drew the largest response (45 percent). This year, its polar opposite — necessary downsizing of personnel — attracted nearly 30 percent. The operational infrastructure challenge most cited is maintaining efficient processes internally (37 percent), which reflected reduced headcounts as well.

Survey data also reveals that capital spending is often being put on hold. When asked last year about their plans for U.S. capital spending in 2015, 67 percent of respondents expected to boost expenditures up to 20 percent or more year over year. This year, 36 percent expect a year-over-year increase for 2016, while 32 percent predict a decline. Nearly half of those who predict a drop expect it to be more than 20 percent – which suggests that well-run companies that have kept their costs down can succeed in this price environment.

When asked about their biggest technology challenges, the two top responses were cost of implementing a new technology platform and access to relevant data for decision-making — each mentioned by about 30 percent of respondents. In addition, when asked in 2014 about their main mergers and acquisitions challenges, by a 10-point margin respondents’ top choice was high costs driven by competition. This year, however, some 54 percent say it was the differences in buyer and seller expectations, outpacing the next highest response of commodity price fluctuations (24 percent) by 30 percentage points.

The full report is available at

About the 2015 Grant Thornton LLP survey of upstream U.S. oil and gas companies

The survey is based on answers from 545 respondents collected in July 2015. Respondents were C-suite and senior executives from U.S. independent producers, midstream operators, oilfield service companies and financial companies. Participant titles included CEO, COO, CFO, CIO, senior vice president, board member, general counsel, and tax and finance professional.

About Grant Thornton LLP

Founded in Chicago in 1924, Grant Thornton LLP (Grant Thornton) is the U.S. member firm of Grant Thornton International Ltd, one of the world’s leading organizations of independent audit, tax and advisory firms. In the United States, Grant Thornton has revenue in excess of $1.4 billion and operates 57 offices with more than 500 partners and 6,400 employees. Grant Thornton works with a broad range of dynamic publicly and privately held companies, government agencies, financial institutions, and civic and religious organizations.

“Grant Thornton” refers to Grant Thornton LLP, the U.S. member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. Services are delivered by the member firms. GTIL and its member firms are not agents of, and do not obligate, one another and are not liable for one another’s acts or omissions. Please see for further details.

About Hart Energy

For more than 40 years, Hart Energy editors and experts have delivered market-leading insights to investors and energy industry professionals. The Houston-based company produces magazines (such as Oil and Gas Investor, E&P, Midstream Business, and FUEL); online news and data services; industry conferences (like the DUG™ series); GIS data sets and mapping solutions; and a range of research and consulting services. For information, visit

Grant Thornton LLP
Adam Bond
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Source: Business Wire (October 27, 2015 - 9:01 AM EDT)

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