Economic concerns dampen energy growth plans

The frenzied growth and optimism that swept the oil and gas industry in recent years is moderating, with fewer executives expressing confidence in the global economy, according to a report released by Ernst & Young this week.

Just 36 percent of responding oil and gas executives had a positive outlook for corporate earnings, a steep decline from the 52 percent who expressed that optimism just six months ago.

The souring sentiments appear tied to dampened views on the global economy. The report found that only 27 percent of the surveyed leaders believe the economy is improving, compared to 55 percent who had a positive outlook in April.  And 61 percent believe the downturn will last for a year or more.

The pessimistic view was most acute in countries affected by the European financial crisis and slowed growth in China.

As a result the report suggests job growth will slow in the industry. About 34 percent of the survey respondents said their companies plan  to create jobs, down from 43 percent in April.

“The current uncertainty seems to be driving companies to increase their focus on preserving what they have, whether this is their skilled workforce or their capital,” said Andy Brogan, Ernst & Young’s global oil and gas transactions advisory leader, in a written statement. “We expect the governing principle of the next six months to be caution.”

Ernst & Young surveyed 178 oil and gas executives worldwide during August and September.  The industry survey was part of the firm’s twice-annual Global Capital Confidence Barometer, an analysis of responses from 1500 leaders from across several industries..

Oil and gas leaders have become more cautious about business moves during the year, according to the survey results. Leaders are more attuned to growing organically, rather than through risky, ambitious deals that transform the direction of a business, Borgan said.

The number of surveyed executives planning to sell off assets during the next year plummeted nearly 70 percent compared to just six months ago. Those expecting to pursue acquisitions fell 10 percent since April.

Meanwhile, paying down debt has become a bigger concern. It’s a top priority for 25 percent of the respondents, significantly more than the 15 percent who identified reducing debt as a top charge earlier this year.