Cash flows

The Shale Revolution that unlocked vast, low-cost oil and gas reserves, resulting in soaring production that transformed the U.S. from a major oil and natural gas importer to a rising exporter, was supposed to usher in a “Golden Age” for exploration and production firms (E&Ps). Instead, investors have increasingly abandoned energy equities, sending the S&P E&P stock index to an all-time low. The index closed at 3,272 on August 16, 2019, or about 75% lower than the all-time high of about 12,500 in mid-2014 and 46% lower than a year ago. And the stock prices of three-fourths of the big, publicly traded E&Ps have hit record lows over the last month. This energy-equities bloodbath would seem to indicate that the E&P industry is on the verge of financial meltdown. However, the just-released second-quarter 2019 results from the 44 U.S. E&Ps we track suggest that’s not entirely the case. Lower commodity prices certainly tightened the screws on the bunch, particularly companies that focus on gas production, but oil-weighted companies managed to eke out profit and cash-flow gains. Today, we provide an in-depth analysis of second-quarter earnings for oil-weighted, gas-weighted and diversified producers.