An Energy Outlook for 2019 Macro Trends and Perspectives

Transcription

1 An Energy Outlook for 2019 Macro Trends and Perspectives Regina Mayor Global Sector Head and US Sector Leader Energy and Natural Resources January 8, 2019

2 Overall positive company outlooks, but less certainty on the economic front 90% CEOs confident in their company s growth prospects 10% 5% 0% -5% 67% CEOs confident in growth of the global economy -10% -15% -20% Dow Jones -5% NYSE Energy Index -19% Dow Jones NYSE Energy Index Source: 2018 KPMG CEO Survey, Wall Street Journal KPMG KPMG LLP, LLP, a Delaware a Delaware limited limited liability liability partnership partnership and and the U.S. the U.S. member member firm firm of the of KPMG the KPMG network network of of independent member member firms firms affiliated with affiliated KPMG International with KPMG 2019 Cooperative International KPMG ( KPMG Cooperative LLP, a International ), Delaware ( KPMG International ), a limited Swiss entity. liability a Swiss All rights partnership entity. reserved. All rights NDPPS and reserved. the U.S. NDPPS member firm of the KPMG network of independent member firms affiliated #KPMGGEC with KPMG International 2 2

3 While prices are down confidence remains within the sector WTI Brent 88% Oil & Gas 89% Power & Utilities CEOs confident in their company s growth prospects Source: 2018 KPMG CEO Survey, EIA KPMG KPMG LLP, LLP, a Delaware a Delaware limited limited liability liability partnership partnership and and the U.S. the U.S. member member firm firm of the of KPMG the KPMG network network of independent of independent member member firms firms affiliated with affiliated KPMG International with KPMG 2019 Cooperative International KPMG ( KPMG Cooperative LLP, a International ), Delaware ( KPMG International ), a limited Swiss entity. liability a Swiss CPE code: ccf6 All rights partnership entity. reserved. All rights NDPPS and reserved. the U.S. NDPPS member firm of the KPMG network of independent member firms affiliated #KPMGGEC with KPMG International 2018 KPMG Cooperative LLP, a Delaware ( KPMG limited liability International ), partnership and the a Swiss U.S. member entity. firm All of rights the KPMG reserved. network of NDPPS independent member firms affiliated #KPMGGEC with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. NDPPS

4 Although prices have been volatile, rig counts have steadily increased over the year 2,000 1,800 1,600 1, U.S. Rig Count $42 WTI minimum price since June , % , , $77 44% WTI maximum price since June Mar-18 Jun-18 Sep-18 Dec U.S. oil production now at 11.7 mbpd Oil Gas What does this mean for rig counts going into 2019? Sources: Baker Hughes, U.S. Energy Information Administration; CNBC; Bloomberg 2019 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International 4

5 And breakeven prices have come down allowing for continued production in this environment Lower 48 states Gulf of Mexico Canada Basin average 12-month average WTI oil futures price $80 per barrel Less competitive More competitive 20 Three Forks Bakken Bone Spring Niobrara SCOOP/ STACK Eagle Ford Wolfcamcamp Wolf- Midland Delaware Lower Pliocene Jurassic Miocene Subsalt Tertiary Miocene Duvernay Montney Cardium Chart Source: Wood Mackenzie 2019 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International 5

6 Disruptive Forces in Oil & Gas

7 At the same time several macro disruptive forces are at play Multi-generational Workforce Rise of Millennials Mobility Intelligent Animation Big Data Urbanization Blockchain Aging Population Internet of Things Downhole Technology EOR Techniques Pad Spacing Seismic Reservoir Analysis Drones/remote Management 2019 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International 7

8 Demographics are influencing the industry The Changing Workforce 50% of the workforce will be millennials by 2020 The Future of HR 77% of HR executives within Oil & Gas recognize the need for the workforce to be transformed, yet less than half are confident in HR s actual ability to transform Source: KPMG HR Survey 2019 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International 2019 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. NDPPS

9 Technology impacts are top of mind for Energy CEOs Artificial Intelligence 85% of Oil & Gas CEOs report they re piloting AI or have already begun implementation of AI for some processes Job Growth 58% of Oil & Gas CEO s feel that AI and robotic technologies will create more jobs 2019 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International 2019 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. NDPPS

10 Companies are also focusing on managing commodity price volatility through targeted improvements Streamlined and standardized processes Adoption of lean six sigma techniques and digital technology/automation to reduce waste in current processes, drive increased design and process standardization, and eliminate rework and quality issues Increased integration with contractors Work along side contractors and suppliers to identify potential areas to reduce costs and increase efficiency through greater coordination of forecast, design changes, adoption of latest technologies, and execution performance Effective field level execution planning Task level planning geared around standard processes, driving increased ability to predict performance, leverage predictive analytics, reduce variation, establish roles and responsibilities, and improve performance Performance management and accountability Performance accountability driven down to the field level, with an integrated approach with contractors to establish a one-team performance mentality 2019 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International 10

11 Additionally companies are focusing on an alternate energy portfolio Drivers of the Renewable Energy Transition 1. Increased competiveness of renewable pricing 2. Investor pressure to reduce carbon 3. Customer and employee pressure for same 4. Changes to information reporting standards 5. Industry peer pressure 2019 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International 2019 Cooperative KPMG ( KPMG LLP, a International ), Delaware a limited Swiss entity. liability All rights partnership reserved. NDPPS and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International 11 11

12 EV/AVs and the Impact on Demand

13 Expansion in mileage will result from substantial increases at both ends of the age spectrum Safe independence for the kids Children will have the freedom to safely travel to meet up with friends or go to the movies or countless other activities U.S. personal miles traveled (PMT) per capita 14,878 +2% 13,044 12,137 +1% +22% 12, % Convenience of my time Working parents and young adults can travelfurther to work asav technology allows them to be productive even during the commute 9,950 12,935 14,650 9,672 Independence for seniors The safetyof seniors driving as they age will no longer be a concern and they can continue being active Pre-driving (0 15) Young Adults (16 29) Parents (30 64) Seniors (65+) 2019 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International 13

14 These combined forces result in an inflection point for both vehicle ownership models and mileage trends as forces begin to take hold Ecosystem view of U.S. vehicle miles traveled (VMT) (a) Examples of the new mobility ecosystem emerging Personal Miles Traveled on a Personally Owned Vehicle with no Autonomous Capabilities AV MaaS EV AV Personal EV AV Personal ICE U.K. to Ban Internal Combustion Engine Vehicles by 2040 The Guardian, July 25 th California utility regulators are turning electric vehicles into grid resources Greentech Media, April 13 th Alphabet's Waymo Taps Avis For Self-Driving Car Maintenance Services Forbes, June 26 th Regional Total Cost of Ownership (TCO) tipping-point on the horizon Note: (a) Other includes motorcycles, non-av MaaS, and non-av commercial personal vehicles (e.g. police cars) 2019 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International 14

15 Thank you Regina Mayor - Global Sector Head and U.S. Sector Leader of Energy and Natural Resources Phone: rmayor@kpmg.com

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