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Capital One: Pressure on Commodity Prices Seen as Biggest Concern for the Energy Industry

March 30, 2015, 07:07 AM
Filed Under: Energy

Pressure on commodity prices was cited by 73 percent of industry professionals who were surveyed at the North American Prospect Expo (NAPE) Summit in February as their biggest industry concern for 2015, according to the second annual Energy Survey by Capital One. The focus on energy prices represented a 50-point increase from those surveyed by Capital One at the NAPE Summit 2014. Only 11 percent of respondents cited increased regulation as their greatest concern, down from 40 percent last year.

Eighty-nine percent of this year's survey respondents do not expect a significant bounce in energy prices for at least 12 months. Only 10 percent expect a price rebound within six months, a significant contrast from last year's more optimistic findings — two-thirds of respondents expected gas prices to remain steady or increase in 2014, and 71 percent anticipated similar stability for oil prices.

Survey participants selected U.S. energy independence (58 percent) and opposition to shale development (27 percent) as the industry trends likely to gain the most momentum in 2015. Respondents who expect growth in alternative energy to be the leading industry trend dropped from 11 percent in the 2014 survey to just 1 percent this year.

Seventy-two percent of survey respondents identified access to/cost of equity capital as the most important financing issue in 2015, followed by refinancing of current debt (17 percent), and access to/cost of senior debt (9 percent).

“Concerns about energy prices will impact the operational and financial outlook of companies across the industry," said Russ Johnson, head of Energy Investment Banking, Capital One Securities. "In this environment, an experienced banking partner can help companies navigate the industry’s challenges and provide customized financing solutions that position clients for future growth."

Eighty-eight percent of those surveyed expect the pace of mergers and acquisitions activity to increase in 2015, a 30-point rise from last year's survey. Only 10 percent of respondents expect M&A activity to decrease.

Despite the volatility in energy prices, respondents maintain a positive outlook overall – 79 percent of those surveyed expect to feel better about the performance of the energy industry in a year, compared with 13 percent expecting to feel worse.

“We expect to see a trend toward consolidation in 2015, as some industry players take advantage of M&A opportunities to strengthen their strategic position and prepare for eventual movement in energy prices," added Bob Mertensotto, head of Energy Debt Capital Markets, Capital One Bank and Capital One Securities. "Capital One is poised to support companies in all market cycles and to help them identify opportunities to strengthen their financial positions."

Capital One conducted a survey of conference attendees at the NAPE Summit in Houston, Texas, on February 12, 2015. The survey gauged the sentiment of the oil and gas industry in the coming year, and respondents included professionals from different specialties within the energy industry. Percentages are based on 107 responses.

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