Tuesday, April 2, 2019

Free Cash Flow For E&P Companies (Combined Total) At Record Highs -- April 2, 2019

See this post -- posted earlier today -- for background: tale of two shale revolutions, or better stated, the two different views of the revolution.

In that post, RBN Energy suggested that oil companies should report a return to nice profits. The RBN Energy note I get is always a business day delayed, so that blog was actually originally posted late last week.

Look at this, today, April 2, 2019, from the Rigzone staff: E&P cash surge could mean return to super profits. Link here.
The world’s public E&P companies saw their free cash flow surge to nearly $300 billion last year and 2019 may be just as promising, according to analysis by Rystad Energy, head of upstream research Espen Erlingsen.

Rystad looked at estimated global FCF for all public E&P companies since 2010. Their analysis shows that FCF peaked in 2011 but declined between 2012 and 2014 due to increased budget investments and more commitments.
The FCF was reduced considerably in 2015 as the oil price collapsed.

However, since 2015, FCF has had a gradual recovery to the all-time highs of today.

“Our analysis of the latest annual reports from the majors clearly indicates that ‘super profits’ are back for large E&P companies,” said Erlingsen. “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.”

And thanks to higher oil prices, lower development costs and lower investment activity, Rystad believes 2019 could be another “blockbuster year.”

“…almost 70 cents for every dollar in profits generated last year for these companies ended up in shareholders’ pockets,” Erlingsen said.
This will be re-posted at the linked post above to keep this all together in one spot.

Graphic from the story linked above:

Apples and Oranges

A lot of stories out today about how incredibly profitable Saudi Aramco is. It is said that Aramco's profits are more than Apple and Alphabet (Google) combined.

That's fine.

I could be wrong but I believe Saudi Aramco is the state oil company of Saudi Arabia and there are no in-country competitors. I could be wrong.

If so, it hardly makes sense to compare the profits of Saudi Aramco with those of non-oil companies, like Apple and/or Google.

 It would be interesting to see the total profits of all oil companies in Saudi Arabia with the total profits of all companies (public and private) in the US. Something tells me we might see a different picture. And, of course, that would be interesting, because up until recently, it was my understanding that Saudi had more oil reserves than the US and that Saudi produced more oil than the US. If accurate, US oil companies, up until recently, were producing less than Saudi Arabia, but making more in profits.

Of course, one challenge that Saudi Arabia has: a fair amount of Aramco's production is bought/sold/used domestically, and my hunch is that it is not being sold at global market rates.

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