In this environment, oil and gas companies need to redouble their efforts to convince investors they are worthy. Most see only two paths to profitability. The first involves continuing to operate as they have in the past—but with some significant changes. Companies on this trajectory will need to maximize their asset efficiencies, capture CO2 and methane emissions, and reduce energy intensity and waste from their operations.
The second path companies envision takes them away from their core business altogether, toward electricity-linked energy. These companies see the 50 percent decline in fossil fuel consumption by 2050 as a catalyst to abandon oil and gas. They are succumbing to compressive disruption, abandoning bad debt and looking for alternative sources of value. As they contemplate sunsetting their oil and gas operations, the move to renewables holds particular allure.
The truth is that resetting or sunsetting their oil and gas capabilities are not the only options for E&P companies. There is a broad middle ground of potential profitability—and renewed investor interest.