Top executives from the energy industry face more global challenges in exploration, employee recruitment, and retention and perception in their sector than ever before. This is according to accounting, tax and business advisory firm Grant Thornton LLP, who announced the results of their 6th annual 2008 Survey of Upstream U.S. Energy Companies.
More than 90 respondents to the survey (30 percent public and 70 percent private companies) want to see individual and corporate leaders focus on increased access to new acreage for exploration, training and developing people to replace the aging and shrinking oil and gas workforce, and educating the general public about the energy industry. The report's findings show signs of strength and weakness within each of these areas.
Reed Wood, Grant Thornton LLP's partner-in-charge of the firm's energy practice, says, "I believe this survey truly reflects what many of the top seasoned industry leaders are facing in the market today."
Successful exploitation of resources provides the greatest potential for enhancing company value and growth, according to 2008 survey respondents. Consistent with the last four years, respondents continue to believe the Gulf of Mexico offers the greatest potential for new discoveries of crude oil and natural gas reserves. Alaska and the Rocky Mountains are the next best potential areas.
Looking ahead, only 27 percent of 2008 survey respondents anticipate more difficulty in securing contract drilling services over the next 12 months. This, too, is fairly consistent with the 2007 survey results, where 29 percent of respondents anticipated difficulty in securing contract drilling services in the following year.
Despite the fact that nearly 75 percent of this year's respondents do not expect problems securing drilling contracts, the lack of good exploration prospects is still one of the most critical issues facing the oil and gas industry today.
Fifty-nine percent of survey respondents feel additional legislative incentives are not required for the exploration and production industry. However, 89 percent of respondents feel additional legislation will be enacted to further protect the environment. In light of this projected increase in legislative action, 42 percent of all respondents are predicting an increase in spending related to environmental remediation or study in 2008.
Respondents anticipate significant growth in industry employment rates over the next three years, with 81 percent anticipating an increase in 2008 and 65 percent anticipating an increase in 2010. In addition to overall industry employment growth, 76 percent of companies surveyed plan to increase their headcount in 2008, and 63 percent say an increase to headcount will be made in 2010. These percentages compare favorably to the importance of attracting skilled personnel, where respondents indicated this is the fourth most important issue in 2008.
"Our industry's greatest challenge continues to be labor," says Richard J. Alario, chairman, president and chief executive officer, Key Energy Services. "Specifically, we regularly search for the best ways to recruit, train and retain a new work force that is willing to perform the dirty, dangerous and uncomfortable jobs we offer and that our customers demand."
As young adults are lured into safe, comfortable office positions with lucrative salaries, the oil and gas industry will continue to struggle to find ways to persuade this generation into the oil fields. Eighty-five percent of respondents anticipate difficulties in hiring and retaining employees—up significantly from 69 percent in 2007 and 65 percent two years go.
Alario sums up the challenge by saying, "We will have to pay very well, be loyal and care very much if we are to reverse the base feelings the Y-genners have about our industry. We must now pay the price for the graying of our industry and the unstable employment for which it was so well known in slower times. Luckily, today we can afford it."
High commodity prices and energy consumption costs have cast the energy industry into the spotlight again. According to 39 percent of survey respondents, conservation could have the greatest impact on reducing energy prices, followed by 18 percent for incentives to increase drilling in the United States. As in past years, many respondents commented that they want to see their leaders enhancing the public's awareness of the risks, challenges and opportunities confronted by all industry participants for their respective customers and energy consumers.
The survey period was from November 2007 through mid-December 2007. Issues explored by the Grant Thornton Survey of Upstream U.S. Energy Companies were identified by seasoned professionals in Grant Thornton LLP's Energy Practice.
More than 90 companies responded to the survey questionnaire. The following indicate the relative size of the companies that responded to the survey: average total assets at the end of 2007 -- $678 million; average revenues for the 2007 fiscal year -- $348 million.
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