As an oil and gas journalist, analysts’ reports have a way of keeping my email alert dinging. On some days those reports keep coming and coming, reminding me of the famous candy-factory scene in I Love Lucy.

But for now, we’ve turned off the conveyor belt and extracted choice nuggets of information from two recent studies that focus on current and future trends in the oil and gas industry.

In the first report, international accounting and consulting organization BDO surveyed 84 senior financial executives at oil and gas companies in the U.S., Russia, the U.K., Australia and Canada. Some of the top findings of the BDO report include:

  • Thirty-nine percent think that the U.S. will lead oil production in the future, and 45% identify North America as the top regional target for expansion.
  • Regarding employment, 61% expect to experience difficulty securing a skilled workforce.
  • Seventy-nine percent of U.S. executives say North America is their top expansion target. Few have designs on East Asia and Latin America, and none indicate a desire to expand in the Middle East.
  • When it comes to entering a foreign market, acquisitions (30%) and joint ventures (30%) are the preferred options.

“Industry leaders suspect that we may be at the apex of a boom-and-bust cycle,” says Charles Dewhurst of the natural resources industry group at BDO. “The oil and gas industry is largely beholden to uncertainty, and short-term fluctuations can halt current positive momentum. Environmental and regulatory concerns, commodity price volatility and geopolitical circumstances can all conspire to throw a wrench into companies’ plans.”

Regarding the regulatory environment, 40% place environmental policy at the top of their list of regulatory concerns. Though U.K. executives most often cite environmental regulation as their top issue, 27% think that anti-corruption/anti-bribery legislation will become a concern. Meanwhile in the U.S., 35% indicated that, in the wake of fiscal policy debates, corporate tax structure is a significant concern.

The BDO report also indicated that executives are concerned about hydraulic fracturing. “With shale expected to lead production this year, executives also cite the impact of its corresponding technology—hydraulic fracturing—as a major environmental concern. A plurality—44%—rank fracing as their top concern this year, and with the exception of Russia executives, in every country rate it as their No. 1 environmental priority.”

In the second survey, analysts at R.W. Baird & Co. recently aimed to measure current industry sentiment and topical trends. Baird polled 28 buyside investors and 27 energy industry contacts.

Here’s what you need to know about the Baird report:

  • Not surprisingly, the Permian, Bakken, Marcellus, and Eagle Ford are regarded as the most favorable plays for E&P investment. “We note that there is a notable divergence between Eagle Ford and Niobrara responses with industry favoring Eagle Ford and investors favoring Niobrara. This investor bias to Niobrara is positive for Whiting Petroleum Corp. while Eagle Ford caution is modestly negative for EOG Resources Inc. and Swift Energy Co.”
  • Thirty-three percent think Eagle Ford condensate/natural gas liquids (NGLs) prices will be “the most impactful negative surprise” in the next three to six months.
  • Twenty-one percent expect emerging play results will be “the most impactful positive surprise, with buyside investors being much more positive than industry respondents.” Similarly, 37% of industry respondents highlighted emerging play results as “the most impactful potential negative surprise” versus 14% for investors. “This highlights industry skepticism over the economic feasibility of new plays,” the report stated.
  • The industry favors gas, while investors favor oil near-term. “Perhaps investors are growing more cautious on gas following the recent run-up,” according to Baird. “This could suggest potential near-term weakness in gassy stocks. We would recommend investors take advantage of potential weakness to position for the long run in Range Resources Corp. and Cabot Oil & Gas Corp.”
  • NGLs will remain the ugly duckling.” The report says that NGL-levered stocks such as QEP Resources Inc., WPX Energy Inc., Devon Energy Corp., Pioneer Natural Resources, Forest Oil Corp. and Swift Energy Co. “are still out of favor with only 2% of respondents preferring tactical overweight of NGLs.”
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