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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…

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Oil & Gas Cash Flow Hits All-Time High

The world’s publicly listed oil and gas companies are bringing in cash at the best rate ever witnessed even though oil prices have only partially recovered from the huge drop suffered in 2014 and 2015, according to Rystad Energy. 

Free cash flow for public exploration and production (E&P) companies skyrocketed last year to almost $300 billion, marking the return of the “super profit” for industry majors. For these players, 2019 could turn out to be another blockbuster year.

“The fact that E&P companies are able to deliver the same shareholder returns despite much lower oil prices points to an impressive increase in profitability,” says Espen Erlingsen, Head of Upstream Research at Rystad Energy.

A Rystad Energy analysis of estimated global free cash flows (FCF) for all public E&P companies since 2010 shows that FCF peaked in 2011. In the years between 2012 and 2014, FCF declined as E&P companies took on more commitments and investment budgets increased. In 2015, as the oil price collapsed, FCF was reduced considerably. Since 2015, FCF has recovered gradually to the all-time high we see today.

“Our analysis of the latest annual reports from the majors clearly indicates that ‘super profits’ are back for large E&P companies. Free cash flow before financing activities was at a record high in 2018, and the mega profits were typically used to pay down debt and increase payments to shareholders,” Erlingsen added.

For 2019, Rystad Energy believes the high free cash flow for E&P companies will continue, hinting that this could be another blockbuster year for these players. Three main factors drive this increased profitability:

**Higher oil prices: The oil market has gradually returned to balance after a period of oversupply
**Lower costs: Since 2014 the cost of developing new projects has fallen on average by 30%
**Lower activity: Global investments within the upstream industry have fallen from around $900 billion to $500 billion.

Rystad Energy has analyzed recent cash flow statements from all the majors plus Norway’s Equinor to get a better sense of who benefits from these profits.

For these companies, cash from operations (defined as revenue, minus all operational costs and taxes) was $211 billion in 2018. Investments totaled $117 billion in 2018, leaving a profit of $94 billion before financing. Out of this, $25 billion was spent on reducing debt, while $69 billion was paid as dividends to shareholders.

“This means that almost 70 cents for every dollar in profits generated last year for these companies ended up in shareholders’ pockets,” Erlingsen remarked.

By Rystad Energy

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Leave a comment
  • Tripp Mills on April 07 2019 said:
    Dear Rystad Energy - unless you commit on here otherwise, let me guess you have shorted peers in your industry and need this to make your peers look from a PR perspective like "shareholders made out like bandits" that "oil and gas stocks are sky high" that "mega dividends have been paid out" - next, what is it how the CEOs make so much money (a lot of it is options). The headline on this article is BLATANTLY MISLEADING - BLATANTLY so please correct it (I can give you mega examples of how wrong factually you are so please don't embarrass yourselves (I live through lots of things in my world). The price of oil is very low, it hit an ultra low price likely at or barely above 35 a barrel and last check on nat gas is 2 and some change - OK - now the facts - Oil has been up in the $140s, nat gas has been up to 12 or so historically - so don't go getting something started with this (with all do respect, it makes me lose respect for you when I see this).
  • Tripp Mills on April 07 2019 said:
    Correction to my comments - headline (I misread that it was oil and gas price - however u get the point that that is the insinuation). Ask offshore investors how they are liking all of this? Same with clean green, etc. Energy needs to rise in cost and companies need to be able to be safely profitable across the board regardless of energy prices (I invest in several to many spectrums and if you do you will know factually what I am saying). The bottom line is and I deal with this way too much of my time - overpumping, (PR that is misleading when I see all time high gain for the week - no, the price went to 35-40 and to come up from that its pennies at a time). All the best.

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