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U.S. Oil Firms Generate Highest Cash Flows Since 2014

U.S. public oil producers saw their combined cash from operations hit $27.5 billion in the fourth quarter of 2021, the largest quarterly figure since the third quarter of 2014, the Energy Information Administration (EIA) said on Thursday. 

The rising crude oil prices in the latter part of last year helped the 42 listed oil firms that the EIA included in its analysis to significantly increase cash from operations, as well as capital expenditures. Capex at the companies jumped by 60% quarter over quarter to $15 billion in the fourth quarter of 2021, according to EIA’s analysis of the published financial reports of 42 public oil producers. 

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Despite the higher capex in Q4, crude oil production was still trending 10% below the record levels seen just before the start of the pandemic. 

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WTI Crude prices averaged $77 per barrel in the fourth quarter of 2021, up by 82% compared with the same quarter of 2020. Production, however, has not grown in response to the much higher oil prices, the EIA said, noting that a shortage of rigs and crews to bring wells online were two of the constraints to a significant increase in drilling activity. 

In addition, U.S. producers focused on completing drilled-but-uncompleted wells (DUCs), which resulted in the fewest number of DUCs in the U.S. oil-producing regions in March 2022 since May 2014. 

The drilling of new wells needs more capital expenditure and hiring rig crews and services providers that are currently in short supply amid bottlenecks in the shale patch. As a result, U.S. tight oil production is not rising as fast as in previous upcycles, and surely not as quick as the Biden Administration wants as it looks to lower the highest gasoline prices in America in eight years. 

All forecasts point to U.S. oil production rising this year compared to 2021, but growth will likely happen at a slower pace than expected a few months ago. Capex discipline from the largest shale firms, supply chain bottlenecks, and labor shortages will cap U.S. oil production growth, industry executives say.

By Tsvetana Paraskova for Oilprice.com

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