OIL AND GAS SURVEY COST-CONSCIOUS OCCUPIERS REASSESSING THEIR REAL ESTATE STRATEGY

2015/2016FIRST EDITION

INTRODUCTION

We are pleased to launch the results of Cushman & Wakefield’s first Global Oil & Gas Survey. The survey aims to understand and report on the real estate aims, objectives and challenges that the world’s largest companies in this dynamic sector are facing.

The focus of this initial survey was to identify the major sector trends impacting the real estate decisions, occupiers’ strategies and the challenges faced within the sector. In addition we wanted to establish to what extent real estate plays a role when the business decisions are taken. We forecast the direction of the identified trends from a property point of view.

The survey was based on an on-line questionnaire followed by face-to-face meetings and conference calls with respondents. We asked occupiers to give their views on key topics:

Challenges and main drivers faced by real estate teams in the last 12 months

The real estate strategy within their organisations

Talent attraction & retention challenges

Emerging markets and the macro issues in the sector that affect real estate

Please note that the respondents of this survey have asked to remain anonymous unless where specifically quoted. However, respondents include a number of the “supermajors” as well a the world’s largest oilfield services firms.

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SUMMARY OF FINDINGS

MAJORITY SAID REAL ESTATE FUNCTION IS CENTRALISED

33%

BUSINESS AND REAL ESTATE DECISIONS:

ARE JOINTLY TAKEN

REAL ESTATE TEAMS VIEWS ARE COSIDERED 54%

46%

REAL ESTATE FUNCTION SITS WITHIN THE PROCUREMENT DEPARTMENT

CLEAR VISION ON FUTURE STRATEGY85% SHORT-TERM

50% MEDIUM-TERM

15% LONG-TERM

BIGGEST CHALLENGES

END TO END SOLUTIONS

VISIBILITY OF WIDER BUSINESS OBJECTIVES

ACCURATE PORTFOLIO DATA

PRIORITIES

COST REDUCTION

SAFETY AND SECURITY

FUTURE OIL AND GAS PRICING

ALTERNATIVE WAYS OF WORKING

THE FUTURE IS IMPACTED BY

TECHNOLOGY

POLITICAL INSTABILITY

COMODITY PRICE

“Current low oil prices have had a huge impact on energy firms and oil exporting nations and we are clearly observing the implications in the oil dependent markets. Due to these challenging macro drivers we are seeing occupiers re-assessing their real estate strategy

in-line with the lower oil price.”

James TaylorEMEA Energy Sector Lead

Oil and Gas Survey | 3

How is the Real Estate function supporting your company's strategy?

To what degree are you able to define your future property strategy?

Where does Corporate Real Estate sit within your business / reporting line?

responded that their views are considered when business decision are made.

58%

28%

14%

50%

reported that the real estate function sits within the Procurement business line.

25%

are part of the Facilities department.

35%

have a Real Estate centralised business line.

confirmed that business and real estate decisions are jointly taken.

noted that they are responsible for the tactical delivery only.

ANALYSIS OF MAIN FINDINGS

The majority of respondents confirmed that the short-term strategy is well defined with both those planned instructions and the ad-hoc business requests well managed by the teams.

1 POOR 5 GREAT

3.4

Q1

Q2

Q3

Only 33% of respondents have clear directions and are already planning ahead.

Half of the occupiers believe their medium strategy is still very well defined.

MEDIUM-TERM

LONG-TERM

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What are the biggest challenges you face in defining your real estate strategies?

ACCURATE PORTFOLIO DATA scored highest in the biggest challenges confronted by the property teams with 3.25 ranking out of 5. Not specific to the oil and gas sector only, when it comes to data the central teams have to deal with the local resistance and ownership control over the lease events.

Some respondents noted that: “Unless a global lease administration exercise is undertaken with all business units required to submit the most updated lease contracts can the property teams track the lease events, operate pro-actively (rather than reactively) and plan accordingly”.

VISIBILITY OF WIDER BUSINESS OBJECTIVES was the second challenge ranked (3.1 out of 5) by corporates that might suggest that the real estate function often operate in isolation and not always with a broader long term view of the business objectives. These might include:

• Change of the strategy in specific new / established locations

• Possible consolidation exercises due to “walk-away” from specific locations

• HR redundancies due to M&A activity• Political and economic trades between

senior management of the company and governments of specific countries

• Revenue of specific locations• Oil price fluctuations.

END TO END SOLUTIONS Several occupiers noted that

providing the entire real estate solution especially in emerging markets is challenging (scored 2.9 out of 5).

“In some cases the requirement will include the residential, hotel, school and retail amenities as well. These instructions will be planned well in advance as majority of the international occupiers will want to build and control these premises. Such instructions take more time to deliver subject to:

• engagement with a service provider that can deliver at the standards imposed by this sector

• lack of open market data thus the need for local market knowledge in these territories

• market elephant traps - occupiers can spend up to 2-3 years to secure a land plot that they have identified due to ownership structure in those countries

• language and cultural barriers” noted one respondent.

AMONGST OTHERS CHALLENGES THAT SCORED HIGH WERE:

Q4

RENTAL / COST FORECASTING

TIMEFRAME FOR DELIVERING SOLUTIONS

HEADCOUNT DATA

OIL PRICE FLUCTUATIONS

Oil and Gas Survey | 5

What drivers / objectives are you currently prioritizing?

ANALYSIS OF MAIN FINDINGS

COST REDUCTION requirements and utilisation targets – these have started to become prevalent with the recent oil price fluctuations and the cost reduction programmes being implemented by majority of the occupiers in the sector.

SAFETY AND SECURITY As identified the security element plays a major role when oil and gas occupiers are selecting real estate options.

June 2014

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$63

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2015

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Q5

TALENT ATTRACTION AND RETENTION – all real estate teams classified the real estate element as “very important” in both staff attraction and retention. Survey respondents rated the quality of real estate as a major factor in attracting talent, more than most industries. One respondent noted: “We need to be appealing in terms of our real estate offer. We are competing not only with our peers but also with tech and life sciences companies when employing STEM (science, technology, engineering, workers and math) workers.”

FLEXIBILITY AND ALTERNATIVE WAYS OF WORKING Oil & gas sector historically has been generous in terms of sq m allocation (well above the common 10-12 sq m / per person standard). With the cost cutting agenda we have started to see several occupiers analysing in H1 2015 how their real estate element plays a role in the savings and where the efficiency and cost reduction could be achieved.

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What are the biggest issues you see impacting the future of the industry?

When asked about the biggest issues that may shape the industry in the coming months 75% identified the political instability and the commodity price as the major issues. The increased instability in the oil producing countries like Russia, Venezuela, Iran, Iraq and Libya trigger ultimately the price changes and consequently a change in business direction.

TECHNOLOGICAL ADVANCEMENTS Improved / new technologies that thus reduce production costs have been identified as the 3rd major issue. As oil prices drop the importance on new technologies to reduce costs are key and can become a huge competitive advantage.

IN TERMS OF EMERGING MARKETS one of the biggest issues teams are facing with is the lack of market data. Half of respondents answered as this being a top issue when looking for real estate solutions in these countries.

Shortage of quality space was noted as being the second most relevant. The build to suit schemes are becoming a common solution in these markets as the current real estate market options do not offer both the quality and quantity of the desired space, considering the required infrastructure, security and control conditions.

We are most grateful to the respondents of this survey as their input has help to provide a picture of what real estate corporate teams think and gave a macro overview of the energy sector and where we see the industry

shifting as the wider economy evolves.

Q6

“On the back of the price volatility and uncertainty, internal real estate teams are being challenged and tasked to deliver savings in all areas of the real estate spend

even in areas where historically have not been a consideration. On the agenda we are seeing disposals, surrenders, sub-leases, utilities spend analysis and space

efficiency exercises all being reviewed by the relevant groups.”

Liliana StoianovaEMEA Energy Sector Team

Oil and Gas Survey | 7

About Cushman & Wakefield

Cushman & Wakefield is a global leader in commercial real estate services, helping clients transform the way people work, shop, and live. The firm’s 43,000 employees in more than 60 countries provides deep local and global insights that create significant value for occupiers and investors around the world. Cushman & Wakefield is among the largest commercial real estate services firms in the world with revenues of $5 billion across core services of agency leasing, asset services, capital markets, facilities services (branded C&W Services), global occupier services, investment management (branded DTZ Investors), tenant representation and valuations & advisory.

To learn more, visit www.cushmanwakefield.com or follow @Cushwake on Twitter.

Copyright © 2015 Cushman & Wakefield. All rights reserved. D381

James TaylorGlobal Occupier ServicesEMEA Energy Sector Leadjames.a.taylor@cushwake.com

Liliana StoianovaGlobal Occupier ServicesEMEA Energy Sector Teamliliana.stoianova@cushwake.com