Pipeline operators may find recovery elusive

Oil and gas executives say they believe the industry has hit bottom for producers and services providers and as low recovery is in the making. But the worst may still be ahead for pipeline companies, according to a recent survey.

Almost two-thirds of the industry professionals responding to consulting firm Deloitte’s annual oil and gas survey said the recovery has already begun, or will next year, the firm said Thursday. Companies are still cutting costs, but executives expect oil prices to rise, capital expenditures to increase and hiring to rebound over the next year.

Rig counts are rising, particularly in the Permian Basin in West Texas, and oil prices holding between $40 and$50 abarrel, well above the recent low of $26 a barrel in February. Job losses in mining and logging, dominated by oilandgas in Texas, slowed to 200jobs last month, after averaging 5,000 a month in the year’ s first half, according to the Labor Department.

“If last year was the year of hard decisions, 2017 will be the slow road back,” said John England, vice chairman, De lo it te and U.S. and Americas oil and gas leader.

At the same time, survey respondents said they expect hard times ahead for pipeline operators. Cuts to exploration and production company spending are beginning to wear on pipeline companies “once thought to be somewhat immune from commodityprice volatility,” said Andrew Slaughter, managing director of the Deloitte Center for Energy Solutions.

Pipeline contracts are being renegotiated or challenged in bankruptcy by oil and gas companies, meaning lower prices and revenues for pipeline operators, Slaughter said.

Almost two-thirds of the pipeline executives surveyed expected a “moderate level” of mergers this year as the industry consolidates in the face of shrinking markets.