Ernst & Young’s Oil & Gas Global Capital Confidence Barometer revealed that only 27% of oil and gas executives feel that the global economy is improving, a sharp decline from the 55% from six months before.
61% of oil and gas respondents believe the global downturn will last at least another year, suggesting that the economic recovery is taking longer than expected.
The global survey of 1,500 senior executives from over 40 countries also found that uncertainty has made oil and gas companies more wary of mergers and acquisitions as a growth strategy, with less than 30% expecting to pursue acquisitions over the next 12 months, a significant decrease from the 48% a year ago.
Deal sizes have also remained fairly small, reflecting an ongoing to risk with 81% of respondents indicating that they will execute deals valued at less than $500 million, although larger deals where the strategic rational is compelling may still go ahead, according to a statement from Ernst & Young.
Approximately half of the respondents from the oil and gas industry are still targeting growth but have also turned their attention to lower-risk organic strategies instead of pursuing ambitious and transformational deals.
“With Iraq alone outlining energy investment needs of US$500b between now and 2030, access to financing will be a critical success factor for the region’s national oil companies (NOCs),” commented Dr. Thorsten Ploss, Ernst & Young’s MENA Oil & Gas leader. “Current uncertainty in the global economy seems to be driving companies to preserve what they have. However, regional NOCs are still expected to fulfill their growth ambitions and maximize benefits for local communities,” he said.
