Last August, we titled our review of Q2 2022 E&P financial results Camelot after rising oil prices and surging natural gas realizations drove revenues, profits and cash flows to levels that seemed like an unrealizable dream for producers that had teetered on the brink of financial instability just two years before. Recent year-end results revealed the strongest returns in the industry’s history, much of which were distributed to long-suffering shareholders. But dreams fade and prices retreat, and Q4 2022 results suggest a far less idyllic 2023. In today’s RBN blog, we review the record 2022 performance and more sobering Q4 results.
After struggling to keep their heads above water since 2014, the 42 E&Ps in the universe of companies we track — which includes every publicly held U.S. E&P with a market capitalization over $500 million, but not integrated energy companies like ExxonMobil and Chevron — recorded back-to-back record profitable years in 2021 and 2022. These producers earned $82 billion in pre-tax operating profit in 2021 then doubled those results to $167 billion in 2022. As shown in Figure 1, the gap between E&P revenue (in dollars per barrel of oil equivalent, or $/boe; gray line) and costs (multicolored bars) is negligible to negative between 2015-20, with soaring profitability in 2021 and 2022 (white-space gap above bars) driven by healthy commodity prices and fiscally disciplined operating and capital expenditures.
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