E&P Employment Levels to Remain Stable in 2010
According to a new study by BDO, one of the nation's leading accounting and consulting organizations, 65 percent of chief financial officers (CFOs) at oil and gas exploration and production companies say employment levels will remain stable at their company in 2010. Another 27 percent said they plan to hire more people.
"Given continued tough market conditions, tightened credit access and lower demand, it's somewhat surprising that only eight percent of CFOs expect their companies to decrease employment levels in 2010," said Charles Dewhurst, a partner and National Energy Industry Practice Leader at BDO. "Apparently, the industry experienced such steep cuts to price, demand and personnel in 2009, there is really nowhere to go but up."
This sentiment holds true when looking at other expectations for 2010 as well, such as demand for oil and gas. Generally, CFOs have a positive outlook. They expect:
- Global (21%) and domestic (13%) demand for oil will increase "substantially"
- Global (51%) and domestic (52%) demand for oil will increase "some"
- Global and domestic demand for natural gas will increase "substantially" (both 30%)
- Global (55%) and domestic (48%) demand for natural gas will increase "some"
These findings are from the BDO 2010 Energy Outlook Survey, which examined the opinions of 100 chief financial officers at U.S. oil and gas exploration and production companies.
Some of the major findings of the BDO 2010 Energy Outlook Survey include:
- Legislative Changes Carry Weight. Almost half (45%) of CFOs say legislative changes will be the most important factor impacting the industry in 2010. Others cite the demand for oil and gas (28%), access to capital or credit (16%), new production technologies (7%) and mergers and acquisitions (3%) as the most important factor. Last year, CFOs thought the most important factor driving growth in the year ahead was increasing demand for both oil and gas.
- Oil and Gas Drilling Outlook. The total number of oil and gas drilling rigs operated by companies are expected to stay relatively stable in 2010 (44% versus 24% last year); 30 percent say the number of rigs will increase "some" and 10% say they will increase "substantially" in comparison to 2009. Numbers are slowly increasing, as some companies look to take advantage of the increased availability of rigs and other drilling equipment. A majority of respondents (59%) expect costs for oil and gas drilling and exploring for their company to increase in 2010, compared with 52 percent last year. More than one-quarter (26%) say costs will stay the same, compared with 14 percent last year.
- IFRS on the Backburner for Most CFOs. Few CFOs say they are planning for a transition to IFRS in 2010 -- 59 percent are "not thinking about IFRS at all" and 33 percent intend not to do anything with IFRS until things become clearer or until the changeover from GAAP is required. Only three percent are actively planning a transition to IFRS.
- Mixed Feelings on SEC's Oil and Gas Reserve Disclosure Rules. Less than half (41%) of respondents believe the SEC's revised oil and gas reserve disclosure rules will provide investors with better information about the optional disclosure of probable and possible reserves -- a drop from 58 percent last year. An additional 29 percent say they "don't know," compared with 19 percent last year.
"More CFOs in the industry are attuned to the requirements for the SEC's modernization of oil and gas reserve disclosure rules, which went into effect on December 31, 2009" said Rocky Horvath, assurance partner in the National Energy Industry Practice at BDO. "However, it appears some may be questioning whether disclosure of probable and possible reserves is ultimately beneficial to their investors."
The BDO 2010 Energy Outlook Survey is a national telephone survey conducted by Market Measurement, Inc., an independent market research consulting firm, whose executive interviewers spoke directly to chief financial officers, using a telephone survey performed within a scientifically developed, pure random sample of U.S. oil and gas exploration and production companies. It is the second annual survey. The survey was conducted in November of 2009.
BDO is the brand name for BDO Seidman, 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 serves clients through 37 offices and more than 400 independent alliance firm locations nationwide. As an independent Member Firm of BDO International Limited, BDO serves multi-national clients through a global network of 1,138 offices in 115 countries. BDO Seidman, LLP, a limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms.