Monday AM June 8th, 2009

Most board members and executives surveyed at a recent roundtable discussion in Houston believe the economy has “bottomed out,” or will by the end of the year. Ed Mayberry reports.

image of KPMG logo

Business leaders at the recent KPMG Audit Committee Institute roundtable discussion are more optimistic than just six months ago, when they expected the economic downturn to last into 2010 and beyond.  Some 44 per cent now think the economy will hit bottom before the end of the year, and 18 per cent believe that it has already bottomed out.  KPMG’s Phil Smith says many of those surveyed are in the energy business.

“The price of oil has crept back up over the last several months.  You know, it’s hitting into the $60 range and above, so that creates optimism.  You know, oil does not have to be $100 a barrel for the oil patch to make money.  You can start seeing people making money at $60, $70 a barrel quite comfortably.  Gas is still down, and I think until the price of natural gas comes up, you’ve got several players that are still concerned about the industry.” 

Smith says Houston energy companies have generally strong balance sheets, and many reacted wisely when things slowed down.

“When they saw the downturn coming the first part of this year, they took pretty strong steps to right-size their companies for lower price and lower demand.  And I think you’re going to see the benefit of that in the last half of the year for a lot of these companies.  They took chargwes in the first part of the year to get their G and A costs and their operating costs in line to where they thought the price of oil and activity was going to be, and now they’ve got that done, and so they’re ready to kind of face the last half of the year.”  

KPMG holds these roundtable discussions in Houston twice a year. 

Ed Mayberry, KUHF Houston Public Radio News.

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