BDO USA LLP released today its 2017 Energy Outlook Survey. The report indicates favorable signs that the long-battered energy industry may finally be on its way to recovery. Emerging from a particularly volatile 2016, during which oil prices plummeted to their lowest point in over a decade, energy CFOs point to the possibility of increasing prices, among other factors, as a reason for renewed hope.

CFOs generally believe commodity prices will rise this year, with 57 percent predicting a price increase for natural gas and 64 percent predicting an increase for oil. In fact, 63 percent of respondents believe increased oil and gas prices will drive overall industry growth in 2017, an uptick from last year (60 percent) and a remarkable resurgence from 29 percent in 2015. Fewer CFOs cite low oil and gas prices as their greatest financial challenge this year compared to last year (62 percent versus 85 percent), and fewer expect decreasing prices to inhibit growth (49 percent versus 55 percent).

“American oil and gas companies have demonstrated remarkable resilience amid the continued industry downturn this past year,” said Charles Dewhurst, global leader of BDO’s Natural Resources practice. “Spurred by OPEC actions, oil prices are steadily climbing and the sector is regaining a sense of optimism that will hopefully come to fruition in 2017 and beyond.”

Nevertheless, the energy industry is not yet out of the woods—low oil prices continue to ravage many areas of the sector. Exploration and production (E&P) company bankruptcies had slowed by the end of 2016, according to the Houston Chronicle, but 53 percent of CFOs still expect bankruptcies to increase in 2017 as last year’s low oil prices continue to haunt this year’s balance sheets. Fifty-eight percent of CFOs report project terminations and delays last year, with 91 percent of those blaming low oil prices. Many companies will try to mitigate the damage by shedding distressed assets—more than half (53 percent) of respondents believe this will be the primary driver of M&A activity, and 35 percent of CFOs expect their own companies will sell off distressed assets in 2017.

These findings are from the BDO 2017 Energy Outlook Survey, which examines the opinions of 100 chief financial officers at U.S. oil and gas E&P companies. The nationwide survey was conducted from September through November 4, 2016.

Additional findings from the BDO 2017 Energy Outlook Survey include:

M&A Accelerates, But Likely to Level in 2017. 2016 saw a great increase in upstream oil and gas M&A activity from 2015, totaling $56.7 billion by mid-November, versus $26.8 billion raised over the same period last year, according to CNBC. Nevertheless, two-thirds of CFOs expect M&A to increase this year, down from 75 percent last year, while 32 percent expect it to stay consistent with 2016 levels. Private equity investment is expected to play a large role in M&A in the coming year as rising prices and healthier financial statements prompt many PE firms to re-explore investment in energy companies. Fifty-four percent of CFOs predict that private equity will be the primary source of capital behind industry transactions this year.

Changing Regulatory Environment is Top Concern. Unsurprising for an election year, concerns around legislative and regulatory changes are high in 2017. The number of CFOs citing legislative changes as their greatest financial challenge this year more than tripled from 4 percent last year. Although 62 percent of CFOs feel better about the U.S. economy, up from 44 percent last year, fears of a recession and its impact on oil price volatility increased from 8 percent to 15 percent in 2017.

“A sense of uncertainty was prevalent in 2016 in anticipation of the U.S. General Election1 and in the months following the Brexit vote,” said Tom Elder, co-leader of BDO’s Natural Resources practice. “That uncertainty is likely to persist in early 2017, as energy companies wait to see how the new administration’s policies will take shape and what impact they will have on the industry.”

New Partnership Taxation Rules to Impact Sector. Consistent with previous years, many CFOs cite intangible drilling costs (42 percent) and percentage depletion (32 percent) as the sector’s top tax issues. This change may have stemmed from the new regulations issued by the IRS in October, which have added an additional layer of complexity to the already intricate nature of partnership structures in the industry.

“Whenever there is a transition between presidential administrations, the potential for tax reform becomes a larger concern across all industries,” saidClark Sackschewsky, tax managing principal with BDO’s Natural Resources practice. “Energy companies are particularly attuned to any changes to tax policy that could impact their bottom line. Adjusting to the recent IRS rulings on partnership taxation is one area that CFOs will likely prioritize in 2017.”

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1.   Survey responses were collected prior to the 2016 General Election on November 8, 2016.