It may seem like a strange turn of phrase, but the best way to describe the E&P sector’s recent round of quarterly earnings calls is a celebration of remarkable climate change. Buffeted and nearly swamped over the past few years by price volatility, investor revolt, regulatory restrictions, and a global pandemic, oil and gas producers finally have the opportunity to bask amid robust returns in an increasingly sunny economic environment. E&Ps are enjoying higher profits and massive free cash flow, raising their dividends, and looking forward to 2022 with renewed optimism. In today’s RBN blog, we outline the dramatic recovery of E&Ps since mid-2020, examine the surge in third-quarter results, and look ahead to the next round of earnings calls this winter.
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Given the recent results, it’s hard to remember how gloomy the outlook seemed for oil and gas producers just 18 months ago. We documented the threat to survival from low prices and a high-cost structure in our April 2020 blog Eve of Destruction and analyzed the tsunami of impairment charges and a looming cash flow crisis in Spring Breakdown three months later. In those dark times, the best prospects seemed to be a long, slow, U-shaped recovery spanning two years. Remarkably, as shown in Figure 1, a faster-than-expected rebound in the economy and rising commodity prices triggered a V-shaped recovery for E&P profits. Per-unit profits for the 37 E&P companies we monitor soared from second-quarter 2020 lows to a three-year high by the first quarter of 2021. Buoyed by higher oil and gas prices, producers, as a group, in the third quarter of 2021 (dashed red circle) posted profits nearly double the level in the first quarter of 2019 (dashed black circle) and cash flows were 33% higher. Both measures significantly exceeded the 24% increase in realizations over the first quarter of 2019, a reflection of the new financial and operating cost discipline embraced by E&P managements.
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About the song
“Holidays in the Sun” was written by Steve Jones, Johnny Rotten, Paul Cook, and Sid Vicious. It appears as the first song on side one on the Sex Pistols’ debut album, Never Mind the Bollocks, Here’s the Sex Pistols. It was released as the fourth single from the album in October 1977. Recorded at Wessex Sound Studio in London in June 1977, the Chris Thomas-produced single went to #8 on the UK charts but failed to chart in the US. Personnel on the record were: Johnny Rotten (lead vocals), Steve Jones (guitar, bass, backing vocals), and Paul Cook (drums).
Never Mind the Bollocks, Here’s the Sex Pistols was recorded between October 1976 and August 1977 at Wessex Sound Studios, with Chris Thomas producing and Bill Price engineering. The LP was released in October 1977 in the UK and November 1977 in the US. It went to #1 on the UK Albums chart, and #106 on the Billboard 200 Albums chart, which says a lot about the resistance the US music business had to punk rock at that time. Four singles were released from the LP. The fact that Never Mind the Bollocks, Here’s the Sex Pistols has been certified Platinum by the Recording Industry Association of America says a lot about the quality and resilience of the album in spite of no radio airplay or marketing in the US at the time of its release.
The Sex Pistols were an English punk rock band formed in London in 1975 by Johnny Rotten, Steve Jones, Paul Cook and Glen Matlock. Matlock was replaced by Sid Vicious in 1977. Under the management of Malcolm McLaren, the band created controversies that led to massive negative press coverage for them. Ultimately it would lead to the band breaking up after a 12-date concert tour of the U.S. in 1978. The Sex Pistols released one studio album and 14 singles. There have been several live bootlegs released, and various band members appeared on The Great Rock ’n’ Roll Swindle soundtrack album. The Sex Pistols have reunited at various times touring with Rotten, Jones, Cook, and Matlock. Johnny Rotten is now a painter and is retired from the music business. Jones has a popular daily radio show called Jonesy’s Jukebox. Cook is the drummer for Man Raze, and Matlock plays bass with Slinky Vagabond. Vicious died in February 1979 in New York City. In November 2006, the Sex Pistols were inducted into the Rock and Roll Hall of Fame. The band rejected the award and refused to attend the induction ceremony.
