Oil has a rosy outlook on the horizon.
Oil has a rosy outlook on the horizon.

There are a number of things looking up for the oil industry at large: Prices are slowly ticking up, the economy is performing well and the former CEO of one of the world’s more formidable oil majors will soon be in charge of the nation’s diplomatic affairs. All in all, oil companies envision 2017 to be a year of recovery, where they can recoup a portion of the losses they incurred over the past two years and hopefully reposition themselves to take advantage of the new oil landscape.

These changes aren’t certain to take effect right away or even pan out as beneficially as insiders are projecting, which is why it will be incumbent upon companies to act nimbly and strategically in the months ahead, traversing any unforeseen negative ramifications that may arise with the incoming federal administration. And at the root of any uncertainty is the fact that prices aren’t expected to rebound completely – they still have a long way to go before the reach 2014 peaks, if they ever do.

This dichotomous climate will be front of mind for executives in 2017, so let’s take a look at a few of the pivotal factors that are sure to be huge in the months ahead.

Project approvals and investments trending up – way up
Bloomberg produced a glowing report of oil’s future this week, highlighting the many positive signs it’s seeing. Using data from energy consultancy firm Wood Mackenzie, Bloomberg noted development on 20 oil and gas fields will begin in 2017, more than double the number in 2016.

By doubling investments in new development, companies believe 2017 could be prime time to redeploy their shale drilling efforts, which have been largely dormant in recent years. And by bringing more expensive shale plays back into the fold, companies have the potential to reap even greater rewards than if they were to simply stick to low-cost, cheap oil from easy-to-extract wells.

After two years of steady, across-the-board cuts, exploration at new and existing sites is pegged to tick up 3 percent this year as well, bringing the total value of domestic spending to $450 billion.

Additionally, companies are doubling their efforts in hard-to-reach, deepwater projects off the Gulf of Mexico, which had previously been deprioritized. With the expectation that a price rally is looming, operators believe they’ve played their cards well and are primed to benefit from less output from competition.

“Most players will be hedging their bets because there’s still some uncertainty where oil prices are going to land,” said Tom Ellacott of Wood Mackenzie, according to Bloomberg. “Companies now believe they have reset their portfolios to operate these sort of low prices that we have been seeing.”

The Financial Times reported that in addition to the 20 approved projects coming online in 2017, there are another 20 awaiting approval. Overall, companies are placing an emphasis on avoiding wasteful spending in the new year so as to put all available spend toward high-potential projects.

Domestic energy priorities could reverse
One of the main takeaways from the Trump administration’s campaign and cabinet picks is that renewable energy is likely to be less of a focus than it was under the tutelage of President Obama. In fact, Trump is expected to roll back a slew of regulations and initiatives that had helped propel solar and wind power, according to Forbes.

Both wind and solar energy are likely to receive fewer subsidies and federal incentives in the next four years, while at the same time, oil, natural gas, hydropower, coal and nuclear energy are expected to become bigger winners.

This role reversal will likely be abrupt and efficient if the incoming administration and new Congressional representatives are able to get on the same page. Trump’s pick for Energy Secretary, former Governor of Texas Rick Perry, is certainly an individual the oil industry can be sure has their interests in mind. Texas, the nation’s largest oil-producing state, could play a more prominent role in U.S. energy policy in 2017.

Rex Tillerson could shake things up
In line with changing energy policies, the oil industry can expect to have a friendly ear close to the White House in Rex Tillerson, the former CEO of ExxonMobil. The new Secretary of State has decades of experience leading some of the most expansive oil ventures in recent memory, as well as dealing directly with foreign heads of state.

The New York Times reported Tillerson has overseen operations in a number of oil-rich regions including Russia, Venezuela and Iraq, among others. This sort of invaluable, worldly experience is sure to help shape and influence Trump’s larger approach to energy policy in addition to creating the type of business climate that incentivizes large-scale, global projects.

Depending on how influential Tillerson is during his tenure in the Trump White House, it could dramatically alter global relations and business incentives for the oil industry.

Trim budgets providing maximum gains
The final linchpin of 2017 for oil companies will be close to home: their budgets. OPEC has vowed to curb its production – Saudi Arabia has signaled to its consumers that this process has already begun – along with Russia and other large players in the industry. However, the U.S. has been operating on barebones budgets for years and is unlikely to fall in line with competitors’ strategies.

On the other hand, U.S. producers aren’t poised to increase budgets either – they’re projecting to be able to squeeze even more money out of each line item, according to BloombergMarkets.

Experts have coined this “the sweet spot” because companies’ operating costs are already as low as possible and any financial gain on a project is likely to be pure profit. And considering oil majors are moving more spend toward new projects, the rewards for such financial steadfastness could be grand.

As prices rise in the new year, oil companies will be pining to capitalize on each of the above trends.