Summary

• Many industry players operating in the Lower 48 have a large amount of cash on their balance sheets in 2019 due to accommodative tax policy and cheap debt
• Longer-term strategic capital deployment will help firms lay a foundation for continued business growth, hedging against weakening macroeconomic fundamentals
• These economic conditions are expected to drive more funds towards M&A activity
• However, to capture M&A value by realizing merger synergies, operators should evaluate whether they have the right data insights on enterprise spend, costs, and market trends to build a savings roadmap
  

Summary

• The US raised tariffs on $200 billion of imports from China from 10% to 25% in early May. China responded with retaliatory tariffs on $60 billion of imports from the US, effective June 1.
• This is the third round of US tariffs on imports from China, which now affect $250 billion of imports. The US has threatened a fourth round of tariffs on $300 billion of imports, or nearly all remaining trade with China.
• The new tariffs cover 1,200 chemical and 500 metal products. They are also the first to include consumer products, which raises the prospect of accelerating price increases for US consumers. Neither List 3 nor List 4 includes rare earth minerals.
• Trade negotiations between Beijing and Washington remain underway. Slowing economic growth in either country would add pressure to advance the negotiations, but supply chain teams must prepare for potential price risks.

We’re thrilled to share that over sixty industry executives across more than forty firms attended the 4^th Annual Oil & Gas Executive Forum on May 22nd at the Petroleum Club of Downtown Houston for our best event yet.

• As China’s economic expansion matures and its GDP growth rate slowly declines, global supply chains will shift as they restructure around new economic realities in China
• A major contributing factor to declining GDP growth rates in China is a slowdown in manufacturing, which constitutes nearly 30% of the country’s GDP
• Increasing costs of production, which include rising labor wages, are making manufacturing in China costlier and thereby exports more expensive to global markets
• The current US-China trade war, in which up to $250B of imports from China are subject to tariffs by the current administration, is adding additional pressure to global trade
• It is imperative that Oil & Gas firms leverage better market data to stay abreast of global macroeconomic developments that can potentially impact their supply chains

As the new year begins and E&Ps continue to face pressure to focus on returns, operators remain on the lookout for incisive market data and forecasts that provide greater visibility into potential risks and opportunities. 

Utilities are in the thick of an industry transformation driven by technological and competitive forces. 2019 shows no signs of slowing down. We have highlighted 5 key trends to stay ahead of in the coming year, so utilities can continue to position themselves for success.

The variability of supplier responses to bid events can pose significant financial and operational risks to energy companies, especially as this behavior is prone to change when market and economic conditions shift. Variances in bid responses during the recent economic recession and recovery motivated PowerAdvocate to analyze the impact of macroeconomic factors on supplier bidding behavior. The aim of this analysis was to uncover trends that, when coupled with project and company-specific data, will enable industry leaders to better anticipate and mitigate project and supplier risk. If you missed our introduction of this analysis, you can read our previous blog about it here.

Our team hypothesized that suppliers who offer a diverse range of services, work across multiple industries, and service a wide geographic area respond to macroeconomic circumstances differently than smaller or more specialized suppliers. To measure these differences, and to better understand how a supplier’s profile influences their behavior, the team categorized bid data into two groups: bids from major suppliers and bids from specialized suppliers.

With cost volatility and a need to continue adapting to an evolving industry, Oil & Gas firms have increasingly turned to innovations such as "digitalizaton" as solutions, with many industry leaders citing it as a top of mind focus in 2018 and beyond. But what is digitalization, and how can firms think about leveraging it effectively to drive greater cost competitiveness and overall higher EBITDA?

To help answer these questions, PowerAdvocate's sister company Wood Mackenzie recently published a report outlining the digitalization landscape in Oil & Gas, including a case study of how one operator drove >$1B in savings and a 25% reduction in third party costs through digitalization and big data from PowerAdvocate.

Historically, energy firms have seen uncertainty in their supplier’s behavior as simultaneously unmanageable and a source of severe risk for their operations. This uncertainty can cause major projects to fall behind schedule and can create reputational and financial loss for an organization.

While this risk has always been a concern for energy firms with high exposure to contractors, the volatility of today’s market highlights the need for all companies to be able to proactively mitigate the risk that suppliers pose to major projects and operations.

Leveraging PowerAdvocate’s energy supplier database of $3.3T in energy market spend and 70K sourcing events, we identified and quantified trends in supplier bidding behavior. Using these insights, energy firms can efficiently plan for changes in bidding behavior and mitigate risks during market fluctuations.

Global trade continues to keep energy companies on their toes. With 60-80% of business line costs coming from supplier activities, owners and operators need data and insights to better understand supply risk. With that in mind, our analysts have built out a comprehensive report summarizing the latest impacts of the 301 trade case.