U.S. Energy Outlook 2014


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The U.S. Energy Outlook survey finds eighty-one percent of middle market energy executives describe 2013 as profitable and 82 percent anticipate continued profitability in 2014.

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U.S. Energy Outlook 2014

  1. 1. 1 | MARCH 2014 Though staring down significant regulatory and operating challenges, U.S. oil and natural gas exec- utives remain unabashedly upbeat. Short- and long-term outlooks for both pricing and profitability are bullish, consistent with current market observations. And though most acknowledge more work needs to be done to address environmental concerns, many believe that the U.S. will continue to advance toward its goals. IN ASSOCIATION WITH: U.S. ENERGY OUTLOOK 2014: PRICES AND PROFITABILITY ON THE RISE Seeking a clearer window into U.S. energy conditions and out- looks, Forbes Insights, in association with CIT Group Inc. (NYSE: CIT), a leading provider of lending, leasing and advisory services to small and middle market companies, including the energy industry, conducted a February 2014 survey of indus- try participants. Based on responses from 141 senior, U.S.-based energy executives, the survey reveals that: • Outlooks for the industry are decidedly positive • Executives see rising energy prices in both the short and long term • Energy executives say their government favors some energy sources over others • Energy executives hope to heighten the debate on energy policy in upcoming elections • In spite of lingering challenges, nearly half of energy execu- tives see U.S. energy independence as a fast-developing reality • Financing for 2014 will focus on a mix of the industry’s infra- structure and working capital needs ® ®
  2. 2. 2 | MARCH 2014 IN ASSOCIATION WITH: U.S. ENERGY OUTLOOK 2014: PRICES AND PROFITABILITY ON THE RISE OUTLOOKS FOR THE INDUSTRY ARE DECIDEDLY POSITIVE • 81% of executives describe the past year as profitable (50%) or very profitable (31%) • Expectations for 2014 are nearly identical, with 82% anticipating a profitable (50%) or very profitable (32%) year • The three- to five-year outlook is even more positive, with 91% of executives anticipating they will be profitable (53%) or very profitable (38%) • 23% describe their outlook as “aggressive” (above average investment and growth); 62% say they will be “active” (“reasonable” investment and growth); 14% are “standing pat” EXECUTIVES SEE RISING ENERGY PRICES IN BOTH THE SHORT AND LONG TERM OIL • 57% see rising oil prices over the next 18 months • Over the next three to five years, 66% expect higher oil prices NATURAL GAS • 65% expect natural gas prices to rise over the next 18 months – one in five (21%) forecast- ing increases of 10% or more • Over the next three to five years, 68% expect higher prices – one in four (26%) anticipat- ing increases of 10% or more POWER • 61% of executives believe electricity prices will rise over the next 18 months – 13% saying such increases will be significant (10% or more) • Nearly three out of four executives (72%) see higher power prices through 2019, with one in five (21%) forecasting a 10% or greater increase ENERGY EXECUTIVES SAY THEIR GOVERNMENT FAVORS SOME ENERGY SOURCES OVER OTHERS • 65% say that overall, current policies inhibit U.S. energy development • 54% say current policies are “pro” natural gas development • Regarding oil, only 23% say current policies are “pro,” while 56% describe policies as “con” • Policies for green energy sources are regarded as “pro” by 80% or more of execu- tives (81% for solar) ® ®
  3. 3. 3 | MARCH 2014 IN ASSOCIATION WITH: ENERGY EXECUTIVES HOPE TO HEIGHTEN THE DEBATE ON ENERGY POLICY IN UPCOMING ELECTIONS • Three out of five (60%) believe energy policy will be one of the most critical issues in the 2014 congressional races; two out of three (67%) say the same for the 2016 election cycle • Two out of three (67%) agree that current energy policies are hampering U.S. energy development – 36% of these saying “severely” • 64% agree that energy policies that discourage and inhibit energy development also hamper U.S. job creation – 36% of these saying “severely” • 55% say that by regulating carbon as a pollutant, the EPA is overstepping its mandate, with 69% saying such actions are spurring higher energy costs; 52% say this role will be a key issue in the 2014 elections FINANCING WILL FOCUS ON A MIX OF INFRASTRUCTURE AND WORKING CAPITAL • 50% will be considering non-recourse financing in the coming year – with 15% expecting to be active or very active • Funding will finance capital spending and infrastructure (49%), working capital (45%) and production expansion (41%) • 24% will use such funding with their exploration, while 10% expect it will be used for storage facilities or transportation U.S. ENERGY OUTLOOK 2014: PRICES AND PROFITABILITY ON THE RISE IN SPITE OF LINGERING CHALLENGES, NEARLY HALF OF ENERGY EXECUTIVES SEE U.S. ENERGY INDEPENDENCE AS A FAST-EVOLVING REALITY • 49% say energy independence is likely (37%) or very likely (12%) in the foreseeable future; 40% say they expect a timeframe of six to 10 years (comparing favorably with the 2012 sur- vey, in which 70% expected energy independence within 15 years) • Key factors include expanded natural gas production (cited by 74% of respondents), sig- nificant new domestic energy discoveries (60%) and approvals of infrastructure projects (e.g., the XL Pipeline – 57%) • 48% believe fracking is safe – with 18% saying “perfectly” so (though 10% say the practice is potentially dangerous and should be more carefully studied and regulated) • 56% say more needs to be done to address known environmental concerns about fracking • 56% say government restrictions on traditional energy sources subsidize green energy ® ®
  4. 4. ABOUT FORBES INSIGHTS Forbes Insights is the strategic research and thought leadership practice of Forbes Media, publisher of Forbes magazine and Forbes.com, whose combined media properties reach nearly 50 million business decision makers worldwide on a monthly basis. Taking advantage of a proprietary database of senior-level executives in the Forbes community, Forbes Insights conducts research on a host of topics of interest to C-level executives, senior marketing professionals, small business owners and those who aspire to positions of leadership, as well as providing deep insights into issues and trends surrounding wealth creation and wealth management. Bruce Rogers CHIEF INSIGHTS OFFICER Brenna Sniderman SENIOR DIRECTOR Hugo Moreno EDITORIAL DIRECTOR Brian McLeod MANAGER, NORTH AMERICA Matthew Muszala MANAGER Lawrence Bowden MANAGER, EMEA William Millar REPORT AUTHOR Charles Brucaliere DESIGNER 60 Fifth Avenue, New York, NY 10011 | 212.366.8890 | www.forbes.com/forbesinsights ABOUT CIT Founded in 1908, CIT (NYSE: CIT) is a financial holding company with more than $35 billion in financing and leasing assets. It provides financing, leasing and advisory services to its clients and their customers across more than 30 industries. CIT maintains leadership positions in middle market lending, factoring, retail finance, aero- space, equipment and rail leasing, and vendor finance. CIT operates CIT Bank (Member FDIC), its primary bank subsidiary, which, through its Internet bank BankOnCIT. com, offers a suite of savings options designed to help customers achieve a range of financial goals. www.cit.com/perspectives For more insights from CIT and to see how we put knowledge to work for the small business, middle mar- ket and transportation sectors, visit cit.com/perspec- tives. To subscribe to the CIT Perspectives Newsletter, please send an email to perspectives@cit.com. CIT PRESS INQUIRIES Curt Ritter Senior Vice President, Corporate Communications curt.ritter@cit.com Matt Klein Vice President, Media Relations matt.klein@cit.com CIT BUSINESS INQUIRIES Dan Infanti Senior Vice President, Marketing and Advertising dan.infanti@cit.com David Fields Assistant Vice President, Marketing david.fields@cit.com IN ASSOCIATION WITH: ® ®