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KPMG Energy Survey: Volatility of Oil and Gas Commodity Prices and Declining Reserves Are Growing Concerns

Posted on: Friday, 12 May 2006, 09:07 CDT

HOUSTON, May 12 /PRNewswire/ -- Oil and gas executives are becoming increasingly concerned over the volatility of oil and gas commodity prices and declining reserves and say their firms will significantly boost upstream capital spending in the year ahead, according to the results of a survey conducted by KPMG LLP, the audit, tax and advisory firm.

In the KPMG survey, which polled 538 financial executives from oil and gas companies in April 2006, 67 percent stated that the volatility in oil and gas commodity prices is bad for the industry, compared with 58 percent last year. And 88 percent of respondents expressed a growing concern over the issue of declining reserves, compared with 83 percent last year.

"Oil and gas executives are facing one of the most challenging environments they've seen in decades when releasing earnings," said Bill Kimble, National Line of Business Leader, Industrial Markets for KPMG LLP. "The marketplace perceives that oil & gas companies have significant influence on the price of gas at the pump."

According to 69 percent of respondents in the KPMG survey, their companies' upstream capital spending would increase by more than 10 percent during 2006 -- significantly more than the 20 percent who responded the same way two years ago.

And mergers and acquisitions appear to be a continuing trend with 21 percent of the financial executives expecting their company to be involved in such a deal over the next year. This is less than the 28 percent that indicated last year they expected their company to be involved in a merger or acquisition during 2005.

"In the last year, as predicted by KPMG's 2005 Energy Survey, we have seen an up tick in merger and acquisition activity in the oil and gas sector as companies tackle the issue of reserve replacement," said Kimble. "This year's results indicate that the trend is set to continue."

Other survey findings include: * Regarding whether there are enough liquid natural gas facilities either being built or that have been built, 57 percent of respondents either think that there are not or are undecided; only 17 percent believe that there are enough. * Forty-five percent suggested that the proposed Windfall Profits Rebate Act of 2005 would result in increased investment outside the U.S. Only 9 percent of respondents felt that the Act would be good for the industry. * Forty three percent of respondents say that the feel Arctic National Wildlife Reserve leasing will be allowed in two to three years; 25 percent say five to seven years; 18 percent say never and 14 percent say it will be approved by budget reconciliation in 2006. * Twenty four percent say that their U.S. spending would increase by between 10 and 30 percent if federal acreage currently off-limits were to become available for leasing and permitting. Surprisingly, 54 percent of respondents say that there would be no impact on their U.S. spending. A further 22 percent said that it would increase by less than 10 percent. * Forty-one percent of the respondents said the most significant challenge facing oil and gas companies over the next year is their ability to hire qualified employees; 18 percent indicated that their greatest challenge was commodity pricing.

KPMG will be discussing these survey results during its Fourth Annual Global Energy Conference, the event for financial executives in the oil and gas industry on May 23 and 24 at the Intercontinental Hotel in Houston. This year's keynote speakers will be The Honorable George Bush, 41st President of the United States and Fred J. Fowler, Group Executive and President -- Duke Energy Gas Transmission.

The conference will address global issues and will feature leaders in the industry from around the world. Topics that will be addressed include: The Oversight Challenge: Views from the Boardroom; Going Global: What Does LNG Mean for the Future of Natural Gas in North America; Capital Markets Update; Finance Function of Future; and a U.S. Accounting Update. Please see the conference website for more information (http://www.kpmgglobalenergyconference.com/).

About KPMG LLP

KPMG LLP, the audit, tax and advisory firm (http://www.us.kpmg.com/), is the U.S. member firm of KPMG International. KPMG International's member firms have nearly 103,000 professionals, including 6,800 partners, in 148 countries.

Contact: Samantha Azzouni KPMG LLP Tel. 201-505-3602

KPMG LLP

CONTACT: Samantha Azzouni of KPMG LLP, +1-201-505-3602

Web site: http://www.us.kpmg.com/http://www.kpmgglobalenergyconference.com/

Source: PRNewswire

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