3 reasons why oil and gas M&A pumps up Austin’s economy

Austin Business Journal | September 2016 | By Dennis Corkran

 

Think oil doesn't matter in the Texas capital? Think again. This guest column from a business broker with decades of energy experience explains why fossil fuels still play a big role in Austin's economy.

 

The oil and gas industry has found a regular spot in Austin business news lately, yet little is known about this vital component of Austin’s economy. This industry, known for its cyclical ups and downs, is resurging, and its performance affects the local economy more than you might think.

 

Here are three reasons why oil and gas mergers and acquisitions, and the success of this industry, is to the benefit of many in Austin:

Job retention and creation

According to the Austin Chamber of Commerce, Austin is the third fastest growing city when it comes to job growth. The recent recovery and subsequent development of the oil and gas industry has contributed to this gain in Austin, with M&As creating and retaining jobs throughout the area. When an oil and gas company is too weak to develop its properties, this company most typically takes steps toward merging with or being acquired by a larger company. This larger, stronger corporation has the capital and ability to develop these resources that otherwise would have remained stagnant. While advancing the industry, this company will likely hire more staff to accommodate the increased workload, meaning more jobs in Austin.

Environmentally conscious R&D

Industry growth influenced by oil and gas M&A activity has opened up an opportunity for technology to be refined, and not just within the oil and gas industry. This increased exploration and research can be largely attributed to Austin’s Clean Energy Incubator and benefits many industries including Austin’s largest industry – the tech sector. Streamlining the oil and gas industry has also driven down the cost to develop oil and gas, leaving capital to spend on continual research. Existing oil and gas companies that have weathered the storm are now growing. With these existing companies thriving and others in development all over Austin, it is essential that these businesses implement EPA environmental mandates to reduce greenhouse gas emissions. Attention to these regulations has increased and is improving the environment.

Economy reinforcement

A common strategy used to reinforce economies is diversification. Varying the types of industries within a given economy allows for it to be more stable and resilient. There is a high concentration of tech companies in the Austin area, though Austin does not exhibit as many cyclical downturns as other nearby economies, the city should diversify its industries so that it is not too dependent on the success of one industry. The facilitation of more oil and gas M&A deals in Austin actually grows the industry and, in turn, can lead to it having a more prominent role in the city’s economy.

 

 

Dennis Corkran, who has more than 38 years of experience in

the oil and gas industry, is a business broker for

Murphy Business & Financial Corporation LLC.

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