As the clock approached midnight on December 31, E&P managements and shareholders likely clinked champagne flutes to celebrate a remarkable four years of prosperity for an industry that had been nearly shattered by two decades of periodic financial crisis. Soaring post-pandemic commodity prices and gold-plated balance sheets provided generous cash flows, enabling substantial shareholder payouts that restored investor support, but after a period of relative stability the outlook for the E&Ps we follow is uncertain. In today’s RBN blog, we’ll review the cash-allocation strategies used by U.S. oil and gas producers in 2024 and examine the factors that could dramatically impact the sector’s performance in 2025.
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Let’s take a brief look at recent history. WTI oil prices cratered to under $20/bbl in early 2020 and averaged just $39.16/bbl for the year. That nearly doubled to $68/bbl in 2021 and rose another 50% to $95/bbl in 2023. Cash flow from operations (CFOA or cash flow) for the publicly traded E&Ps we cover rose from $36 billion in 2020 to $76 billion in 2021 and a record $127 billion in 2022. That allowed producers to institute unprecedented dividends and share buybacks, which rose from a combined $15 billion in 2021 to $45 billion in 2022. The average oil price retreated to $77.58/bbl in 2023 but cash flows of $101 billion supported a still historically strong $31 billion in share buybacks and dividends. The average dividend yield for the E&P sector in 2023 was 3.8%, just above the 3.7% paid by the utility sector, which was second highest, and nearly three times the average 1.3% yield for the S&P 500.
The average WTI oil price remained steady at $76.55/bbl in 2024. But the 37 E&Ps in our universe generated $105 billion in cash flow in 2024, 3% higher than in 2023, mainly due to acquisitions completed during the year. Total investment (including non-upstream capex) was $66.4 billion, 5% higher than 2023. This yielded a re-investment rate of 63% of CFOA in 2024 (blue bar in Capex grouping in Figure 1 below), just ahead of the 62% plowed back in 2023 (yellow bar). These two most recent years stand in stark contrast to 2021-22, when the reinvestment rate fell to circa 40% (orange and gray bars), and 2020, when 82% of CFOA (blue bar) was put back into oil and gas assets.
Figure 1. E&P Cash Allocation, 2020-24. Source: Oil & Gas Financial Analytics, LLC
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About the song
“Steady, As She Goes,” was written by Jack White and Brendan Benson and is the first track and debut single from the Raconteurs’ first album, Broken Boy Soldiers. Released in May 2006, the song went to #1 on the Billboard Alternative Songs and #54 on the Billboard Hot 100 Singles charts. Personnel on the record were: Jack White (vocals, guitar, keyboards), Brendan Benson (vocals, guitar, keyboards), Jack Lawrence (bass, backing vocals), and Patrick Keeler (drums).
Broken Boy Soldiers was recorded during 2005 at Le Grande studio in Detroit and produced by Brendan Benson and Jack White. White and Benson wrote all the songs on the album. Released in May 2006, it went to #7 on the Billboard 200 Albums chart. Four singles were released from the LP.
The Raconteurs are an American rock band formed in Detroit in 2005 by Jack White, Brendan Benson, Jack Lawrence and Patrick Keeler. Lawrence and Keeler were members of the Greenhornes, and White and Lawrence are also members of the Dead Weather. The band is based in Nashville and released their last studio album, Help Us Stranger, in June 2019. They released a live EP, Live at Electric Lady, in May 2020 and have plans for a future release of a live album, Live in Tulsa, from recordings made at Cain’s Ballroom in Tulsa during October 2019. They have released three studio albums, one live EP, and 14 singles.
Jack White (John Anthony Gillis) is an American singer, songwriter, multi-instrumentalist, record producer and record label owner (Third Man Records). As a solo artist, he has won 14 Grammy Awards, a Brit Award, and five MTV Video Music Awards. He has released five studio albums, six live albums, one compilation album, and 20 singles. With The White Stripes, he released six studio albums, 12 live albums, and 26 singles. With the Dead Weather, he released three studio albums. With the Raconteurs he released three studio albums, one live EP, and 14 singles. White initially came to prominence as the singer and guitarist in the Detroit garage rock duo The White Stripes. He runs Third Man Records in Nashville, and lives in Nashville and Tulsa. He continues to record, produce, and tour with various projects.
