U.S. publicly traded oil companies increased shareholder returns and reduced debt as private oil companies lead production growth

In the second quarter of 2022 (2Q22), financial results for 49 U.S. exploration and production (E&P) companies showed the companies received the largest collective amount of cash from operations in the past five years. Similar to recent quarters, companies kept capital expenditure below historical levels and redirected their increased cash from operations toward debt reduction, share repurchases, and dividends. Other factors, including higher oilfield services costs and supply chain constraints, could be affecting E&P capital expenditure budgets. One potential effect of less spending on capital expenditure is that growth in crude oil and natural gas liquids (NGL) production from publicly traded companies might be lagging behind production growth from private companies since the onset of the COVID-19 pandemic in 2020.

We base our analysis on the published financial reports of 49 publicly traded oil companies that produce most of their crude oil in the United States. As a result, our observations do not represent the sector as a whole because the analysis does not include private companies that do not publish financial reports. In 2Q22, these 49 publicly traded companies collectively produced about 34% (4.0 million barrels per day [b/d]) of all U.S. crude oil produced in the quarter.

The West Texas Intermediate (WTI) crude oil price averaged $108.93 per barrel (b) in 2Q22, an increase of 65% ($42.74/b) compared with 2Q21 and 14% ($13.75/b) compared with 1Q22. Cash from operations for the E&P companies increased 94% ($19.5 billion) to $40.2 billion in 2Q22 from 2Q21 and increased 56% ($14.5 billion) from 1Q22 (Figure 1). Crude oil production in 2Q22 was 1% (58,000 b/d) higher than in 2Q21. Compared with pre-pandemic levels, production in 2Q22 remains 9% (393,000 b/d) lower than in 1Q20. Capital expenditure increased 57% ($5.1 billion) compared with 2Q21 to $14.1 billion, but it declined 4% ($531 million) compared with 1Q22. Despite the year-over-year increase, capital expenditure remained 30% lower than the quarterly average of $20.2 billion per quarter in the pre-pandemic years of 2017–19.

In the first half of 2022 (1H22), the E&P companies allocated most of their cash to shareholder returns (share repurchases and dividends) and debt reduction. The companies received $65.9 billion in cash from operations in 1H22 (Figure 2). Over the same period, they used $9.3 billion on net share repurchases, $12.8 billion on dividends, and $16.4 billion to pay off debt. These three uses of cash represent 59% of cash from operations in 1H22, which is much more than in recent years. Shareholder returns in 1H22 of $22.1 billion were higher than full-year allocations in each of the past three years. Cash spent to reduce debt in 1H22 nearly equaled the total debt paid off in all of 2021. Capital expenditure in 1H22 of $28.8 billion was the highest first-half-of-year allocation since 2019, but represented the lowest allocation as a percentage of cash from operations in at least the past five years at 44%.

When broadening the analysis to all publicly traded companies with crude oil and NGL production in the United States—86 companies as of 2Q22—a comparison of total production from publicly traded companies with production from private companies reveals private companies increased production at a faster pace than publicly traded companies over the last two years. We totaled U.S. field production of crude oil and NGLs from our Petroleum Supply Monthly and compared it with the U.S. production provided by publicly traded companies on financial statements compiled by Evaluate Energy to estimate private company production for the past five years. As of 2Q22, production from publicly traded companies remains 6% below their collective 2019 quarterly average (Figure 3). Private companies’ production returned to pre-pandemic levels more quickly than publicly traded companies. Private companies surpassed their 2019 quarterly average production in 4Q20 and were 14% above the 2019 quarterly average in 2Q22. Although publicly traded companies produced more than private companies before 2020, private companies overtook publicly traded companies in 4Q20 and have maintained that position over the past six quarters.

For questions about This Week in Petroleum, contact the Petroleum and Liquid Fuels Markets Team at 202-586-5840.