EIA: U.S. oil producers increase shareholder distributions

7/24/2019

WASHINGTON – The U.S. Energy Information Administration reports first-quarter 2019 results for 43 U.S. oil producers indicate they have increased shareholder distributions through dividends and share repurchases during the past two years, averaging 28% of cash from operations since the beginning of 2018. As the overall level of net income, or after-tax profits, increased for this set of companies in recent quarters, many of them increased both shareholder distributions and capital expenditures. Oil price declines since the second quarter of 2019, however, could reduce revenue and cash from operations going forward. This analysis is based on the published financial reports of these 43 companies and does not necessarily represent the financial situation of private companies that do not publish financial reports.

West Texas Intermediate (WTI) crude oil prices averaged $54.82/bbl in the first quarter of 2019, a decrease of $8.08/bbl (13%) compared with the price in the first quarter of 2018. Lower prices contributed to a year-over-year decline of $1.2 billion (8%) in cash from operations in the first quarter of 2019 compared with the first quarter of 2018. The decline in cash from operations was the first year-over-year decline since the third quarter of 2016. Some of the decline in cash from operations may have been mitigated by an increase in liquids production, which grew 0.7 MMbpd, or 13%, year-over-year for this group of companies. Capital expenditures declined $0.3 billion (2%) during the same period (Figure 1).

Many producers have been balancing increases in capital expenditures with other uses of cash, such as debt reduction, share repurchases, or dividend increases. Some producers have reduced debt—particularly in 2016 and 2017—but more recently, they have instead increased shareholder distributions through these dividend increases and share repurchases. Analyzed on a quarterly average basis, these companies have generally increased cash from operations, capital expenditures, net share repurchases, and dividends for the past several years through 2018. Except for dividends, however, these all declined in the first quarter of 2019 compared to their 2018 quarterly averages.

The financial statements reveal that, when combining gross share repurchases with dividends, the companies spent more than $4 billion on shareholder distributions in the first quarter of 2019, which was 31% of cash from operations (Figure 3). Although they can vary from quarter to quarter, shareholder distributions through share repurchases and dividends have averaged 28% of cash from operations since the beginning of 2018.

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