While the overall economy may be difficult to decipher, a CFO’s particular viewpoint may depend on the fortunes of the industry they work in. Right now, it’s an especially good moment to be a finance chief in the energy sector.
A majority (56%) of energy finance leaders surveyed by Grant Thornton said global and domestic economic conditions will have a positive or very positive effect on the energy industry over the next six months, the professional services firm wrote in its survey report.
Only 15% said the effect would be negative.
The industry outlook is positive “because prices remain high relative to historical levels, and hydrocarbon demand continues to increase as renewable production is not accelerating fast enough to meet the rising demands for energy,” said Bryan Benoit, global head of energy and resources for Grant Thornton.
To be sure, the industry is not devoid of challenges. In many cases, the report noted, energy companies’ operations aren’t nearly as efficient as they would like. In fact, 40% of survey respondents identified achieving operational efficiency as their top business challenge for the second half of 2024.
That was something of a landslide result, as the next-greatest challenge, accessing capital, was the top challenge for only 11% of respondents.
A key operational issue for many energy companies is the supply chain. Although a majority of those polled said their supply chain and procurement function is satisfactory, 27% said it at least occasionally fails to meet business needs.
Exactly a quarter (25%) of the survey participants said they’re considering implementing new supply chain management technology to improve operational and financial management. That’s the same proportion that are looking into acquiring AI technology (including generative AI and machine learning) for that purpose.
However, the energy industry is trailing the field in its use of AI to date. Only 19% of energy CFOs said their companies are currently using it, compared with 47% of CFOs from all industries in another recent Grant Thornton survey. About the same number (20%) of energy CFOs said they are not using AI and don’t plan to in the near future.
The technology systems attracting the most interest from energy finance leaders are core ERP financials and financial management and budgeting tools (both at 42%).
Grant Thornton also asked about energy finance leaders’ views on M&A, which were mixed. Half said there’s at least a moderate possibility their company would participate in a deal over the next 12 months. The other half said there’s only a slight possibility or no possibility that they’ll do so.
Many energy companies are looking at M&A as a path to operational efficiency, Grant Thornton noted. “Traditional energy is making a comeback in M&A as upstream consolidation continues, likely driven by renewed confidence in the need for hydrocarbons in the years to come,” said Philip Christy, Grant Thornton’s managing director of transaction advisory services.
