US Fracking Sector Disappoints in 2Q
A review of 29 fracking-focused oil and gas companies revealed “meager” cash returns in the second quarter of 2019.
The report, which was carried out by Sightline Institute and the Institute for Energy Economics and Financial Analysis (IEEFA), noted that only 11 of the 29 companies under review registered positive free cash flows and that the 29 companies combined generated $26 million in aggregate free cash flows.
These aggregate free cash flows were said to be “far too modest to make a significant dent in the more than $100 billion in long-term debt owed by these companies, let alone reward equity investors who have been waiting for a decade for robust and sustainable results”.
The report, which stated that free cash flow is a crucial gauge of financial health, highlighted that “disappointing” cash flows have “soured” investors on the sector.
It also noted that, at the close of 2Q, the oil and gas sector was near the bottom of the S&P 500 and stated that by August 15, the sector hit “rock bottom, with drilling, exploration and production, and equipment and services leading the decline”.
“There were winners and losers this quarter, but overall, the oil and gas sector is still underperforming on virtually every financial measure,” Sightline Institute’s Clark Williams-Derry said in a company statement.
“Fracking remains a highly tenuous proposition for investors,” Williams-Derry added.
IEEFA Director of Finance Tom Sanzillo said, “as underwhelming as these results were, they were an improvement over previous quarters”.
“Still, investors would do well to remain skeptical and view the sector as highly speculative,” he added.
Sightline Institute describes itself as an independent, nonprofit research and communications center. The IEEFA conducts research and analyses on financial and economic issues related to energy and the environment.
A full list of the 29 companies analyzed in the report can be seen below:
- Apache Corporation
- Anadarko Petroleum Corporation
- Antero Resources Corporation
- Chesapeake Energy Corporation
- Continental Resources
- Cabot Oil & Gas Corporation
- Callon Petroleum Company
- Carrizo Oil & Gas
- Concho Resources
- Denbury Resources
- Devon Energy
- EOG Resources
- EQT Corporation
- Diamondback Energy
- Hess Corporation
- Laredo Petroleum
- Marathon Oil Corporation
- Matador Resources Company
- Noble Energy
- Oasis Petroleum
- PDC Energy
- Pioneer Natural Resources Co.
- QEP Resources
- Range Resources Corporation
- SM Energy Company
- Southwestern Energy Company
- Whiting Petroleum Corporation
- WPX Energy
- Cimarex Energy Company
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