Crude oil price erosion over the past two years has resulted in declining earnings and cash flows for E&Ps, many of which have struggled to sustain the generous shareholder return programs they had developed to recapture investor support. Now, the EIA is forecasting a 26% plunge in the average 2026 price for WTI, to only $47.77/bbl. The prospect of realizations dipping below the $50/bbl mark — often cited as the critical breakeven point for shale profitability — portends steep cuts in capital investment and dividends for the producers most exposed to crude oil prices. In today’s RBN blog, we present a new metric that calculates the oil price sensitivity of the 39 producers we cover and analyze their ability to weather the price dip.
RBN's US & Canadian Interior Crude Oil Infrastructure Map features pipelines, refineries, and terminals that are new, existing, and under development from Canada to the Bakken Shale to Cushing.
With the single exception from a temporary spurt in oil prices in Q1 2025, E&P profits have been steadily declining since 2022. As we discussed in Wrong Road Again, the Q2 2025 pre-tax operating earnings of the 39 E&Ps we track fell 36% to $9.48/boe from $14.81/boe in Q1 2025 and pre-tax operating cash flow was down 19% to $21.74/boe. The Oil-Weighted E&Ps saw an even greater 41% reduction in earnings. As oil slipped to the $63-$64/bbl range, realized prices for our entire universe of companies declined 14% to $33.03/boe. Despite the declining free cash flow, the cash allocated to dividends held steady at $3.6 billion and not a single company reduced dividend payments. E&Ps reduced share repurchases by $1 billion to $2.6 billion, however, and cut back investment and acquisitions.
Now, with another sharp decline in oil prices looming — see the forecast in the EIA’s October Short-Term Energy Outlook (STEO) in Figure 1 below — it is hard to see how the current dividend level can be sustained.
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About the song
"Sensitive Kind" was written by J.J.Cale and appears as the sixth song on J.J. Cale's fifth studio album, 5. The theme on 5 focuses on love and lust, and this song concerns treating your lover right because she's the "sensitive kind." Listen to Cale's guitar licks on this song, and they will tell you everything you need to know about restraint and soulfulness in playing the blues that defines the "Tulsa Sound." The song was recently featured in the Hulu series, The Lowdown, which takes place in Tulsa. It has been covered by Santana, Eric Clapton, Don White, and Donovan. Personnel on the record were: J.J. Cale (vocals, guitars), Carl Radle (bass), Buddy Harman (drums), Jimmy Karstein (congas), David Briggs (piano), Farrell Morris (vibraphone), and Cam Mullins (string arrangements).
The album, 5, was Cale's first album released in three years. It was recorded at Crazy Mama, The Lakehouse, Columbia, and Woodland studios in Nashville, where Cale was living at the time. Produced by Audie Ashworth, it was released in August 1979. It failed to make the Billboard charts. No singles were released from the LP.
J.J. Cale (John Weldon Cale) was an American guitarist, singer, and songwriter. Raised in North Tulsa, Cale developed his guitar chops playing at early rock clubs in Tulsa such as The Birdcage, Glory Hole, and Paradise Club. His comrades-in-arms at the time were Tulsa musicians Leon Russell, David Gates, Carl Radle, Chuck Blackwell, Jimmy Marham, Roger Tillison, David Teegarden, and Jimmy Kasrstein, all of whom made the trek to Los Angeles to seek fortune and fame in the late 1950s. Cale made most of his money from other artists covering and having hits with his songs. He released 15 studio albums, three live albums, two soundtrack albums, 13 compilation albums, and 61 singles. His early singles from the late '50s to the mid '60s are worth looking up. In 1966, he was part of The Leathercoated Minds, which released the album A Trip Down Sunset Strip on Viva Records. Produced by Snuff Garrett, the album included Tulsa's Roger and Terrye Tillison, Jimmy Markham, Leon Russell, and Jimmy Karstein. The Road to Escondido, the album Cale made with Eric Clapton, won a Grammy Award for Best Contemporary Blues in 2008. J.J. Cale died in San Diego in July 2013 at 74.
"About the Song" -- written by Mickey McMahan , RBN Director of Musicology
