Reflecting on the impressive uptick in the U.S. oil and gas industry across the past year, how do oil and gas industry executives feel about the industry heading into 2018? According to a recent survey by Norwegian technical advisor DNV GL Oil and Gas, confidence among senior oil and gas professionals is on the rise.
2018 O&G Sector Sentiment Rises 31%
Despite numerous consecutive years of uncertainty, industry pros apparently feel a true turnaround is at hand.
DNV GL’s Oil and Gas Industry Outlook 2018 reports that, after surveying 813 global oil and gas industry senior professionals and executives, confidence about industry growth for the upcoming year rose to 63% -up from 32% in last year’s survey.
How will this newfound optimism impact oil and gas companies going forward? No matter the level of confidence, cost control is still a popular strategy. Around 50% of survey participants said they will continue to increase cost control measures through 2018, similar to the response seen in 2017.
Companies Plan to Increase Capital Spending, R&D Funding
What has changed are company plans for capital spending and expansion. Survey participants who said they will maintain or increase capital spending rose from 39% in 2017 to 66% this year.
Around 33% of participants said they plan to increase R&D funding in 2018, compared to just 15% across the past three years. And 62% of respondents expect to maintain or increase employee numbers this year, up from just 43% in 2017.
Price Stability, Lower Costs Contribute to O&G Optimism
Maria Moræus Hanssen, CEO and DEA Deutsche Erdoel AG Management Board Chair, stated that higher oil and gas prices along with lower operating and investment costs are two major contributors to the rise in confidence among industry professionals.
Today’s optimism around the oil and gas industry doesn’t require $100 prices. Rather, increased price stability mean companies can hit margins at $55 and $60 oil.
In addition, improved technology and shorter exploration and production cycles are allowing companies to consider low cost, high paced projects – allowing for faster response time to market fluctuations.
Understandably, confidence levels in DNV GL’s report were disparate between small and large companies. Of oil and gas professionals from larger companies, 75% feel they will reach profit targets in 2018, compared to less than 50% of professionals from smaller companies.
“The winners in our industry this year are those who can continue to make a clear shift from an expansion mindset to a margin mindset and recognize the importance of implementing new models and technologies to improve operational efficiency,” said Liv Hovem, DNV GL Oil and Gas CEO.