• 5 minutes 'No - Deal Brexit' vs 'Operation Fear' Globalist Pushback ... Impact to World Economies and Oil
  • 8 minutes China has *Already* Lost the Trade War. Meantime, the U.S. Might Sanction China’s Largest Oil Company
  • 12 minutes Will Uncle Sam Step Up and Cut Production
  • 2 hours Maybe 8 to 10 "good" years left in oil industry * UAE model for Economic Deversification * Others spent oil billions on funding terrorism, wars, suppressing dissidents * Too late now
  • 8 hours Russia Accuses U.S. Of Stoking Tensions With Missile Test
  • 7 hours OPEC will consider all options. What options do they have ?
  • 2 hours Recession Jitters Are Rising. Is There Reason To Worry?
  • 6 hours CLIMATE PANIC! ELEVENTY!!! "250,000 people die a year due to the climate crisis"
  • 3 hours TRUMP'S FORMER 'CHRISTIAN LIAISON' SAYS DEEPWATER HORIZON DISASTER WAS GOD'S PUNISHMENT FOR OBAMA ISRAEL DIVISION
  • 11 hours With Global Warming Greenland is Prime Real Estate
  • 6 hours What to tell my students
  • 2 hours NATGAS, LNG, Technology, benefits etc , cleaner global energy fuel
  • 21 hours Domino Effect: Rashida Tlaib Rejects Israel's Offer For 'Humanitarian' Visit To West Bank
  • 18 hours In The Bright Of New Administration Rules: Immigrants as Economic Contributors
  • 15 hours Get First Access To The Oilprice App!
  • 4 hours Flaring is at Record Highs in Texas
Alt Text

Saudis Scramble To Arrest Oil Price Slide

Saudi Arabia has approached other…

Rystad Energy

Rystad Energy

Rystad Energy is an independent oil and gas consulting services and business intelligence data firm offering global databases, strategy consulting and research products. Rystad Energy’s…

More Info

Premium Content

Only 10% Of U.S. Shale Drillers Have A Positive Cash Flow

Nine in ten US shale oil companies are burning cash, according to Rystad Energy.

Rystad has studied the financial performance of 40 dedicated US shale oil companies, focusing on cash flow from operating activities (CFO). This is the cash that is available to expand the business (via capital expenditure, capex), reduce debt, or return to shareholders.

Only four companies in our peer group reported a positive cash flow balance in the first quarter of 2019, bringing down the share of companies with a positive cash flow balance from the recent norm of around 20% to just 10%. Total CFO fell from $14 billion in the fourth quarter of 2018 to $9.9 billion in the first quarter of 2019.

“That is the lowest CFO we have seen since the fourth quarter of 2017,” says Alisa Lukash, Senior Analyst on Rystad Energy’s North American Shale team. “The gap between capex and CFO has reached a staggering $4.7 billion. This implies tremendous overspend, the likes of which have not been seen since the third quarter of 2017.”

With negative cash flows, shale companies have historically relied on bond markets to finance their operations. Without additional funding and any debt refinancing, capex would have to be cut.

However, no US shale company has made a public offering since the sharp fall in oil prices – and subsequent share price slide – late last year, marking the longest gap in public capital issuance since 2014.

March and April 2019 saw a few of the more indebted operators issue bonds, intended to partly cover outstanding obligations for the coming year. However, pricing for this type of issuance has risen substantially due to the increased Fed Rate and the overall increased risk associated with US oil companies from a market perspective. Related: Russia Considers Accepting OPEC Cuts Extension

“Recently released data, which confirmed dismal first quarter earnings, only served to cement negative market sentiment,” Lukash said. “While shale operators continue to focus on improving capital efficiency, investors are putting the industry under extreme pressure, leaving no room for undisciplined spending in 2019.”

Many operators are building production momentum now after a seasonal dip during the winter months. As oil prices improve Rystad Energy expects the second quarter will see a significant increase in CFO while capex remains stable.

The majority of US shale oil producers have slightly reduced their long-term debt by paying down obligations which will soon reach maturity. This supports the deleveraging goals of many E&Ps.

“When considering available cash for a potential stockholder payback, the majority of US shale oil operators saw free cash flow to equity below zero in the first quarter,” Lukash remarked.

In the second half of 2019 Rystad Energy expects drilling activity to stay robust, potentially increasing transaction volumes rather than inducing an inflow of capital into the industry.

“Larger diversified operators, which have multiple cash generating engines and are more resistant to volatile commodity prices, will be especially poised to open up to acquisition of new acreage,” Lukash added.

By Rystad Energy

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play