The return of $70/bbl WTI raises an important question: With a lot more cash flowing in, will public E&Ps maintain the financial discipline they’ve tried to live by since the crude oil price crashes of 2014-15 and, more recently, the spring of 2020? We’ve said it before, but it bears repeating that many producers once prided themselves on the riverboat-gambling nature of their business but, after a major scare or two, came to adopt a far more conservative approach to investment based on their new 11th commandment: “Thou shalt live within cash flow.” Emerging from the pandemic, E&Ps’ 2021 capital investment announcements guided to maintenance-level outlays designed to maximize free cash flow for debt reduction and returning cash to shareholders through dividends and share repurchases. Still, old habits die hard, right? So, when oil prices strengthened and cash flow soared in the first few months of 2021, we wondered if producers would give in to temptation to reap short-term benefits from their accelerating output. Today, we analyze the actual first quarter cash-flow allocation of the 39 E&P companies we monitor and compare it with the deployment of cash flow in 2019 and 2020.
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In our analysis, we looked at the cash flow from operations, cash flow from investing, and cash flow from financing sections of the cash flow statement contained in each company’s SEC filings. The results showed that E&Ps invested at least as conservatively as they had indicated in their previous financial guidance. As shown in Figure 1, just 57% ($8.9 billion; blue slice) of the $15.5 billion in cash flow generated from operating activities by the 39 public producers we track went to capital spending, including acquisition outlays and net-of-asset sale proceeds, yielding $6.5 billion in free cash flow. Another 29% ($4.4 billion; orange slice) was applied to debt reduction, net of new borrowings; and 14% was returned to shareholders, 11% ($1.7 billion; yellow slice) as dividends and 3% ($439 million; gray slice) for share repurchases net of equity issuances.
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About the song
“Take It Easy” was written by Jackson Browne and Glenn Frey. It appears as the first song on side one of the Eagles’ debut album, Eagles. Released as the first single from the album in May 1972, it went to #12 on the Billboard Hot 100 Singles chart. The song was written by Browne and Frey when they lived in the same apartment building at 1020 Laguna Avenue in the Echo Park community of Los Angeles. Browne would later record the song for his second studio album, For Everyman. There is a “Take It Easy” Glenn Frey statue in Corner Park in Winslow, AZ, in tribute to the song. Personnel on the record were: Glenn Frey (lead vocal, acoustic guitar), Bernie Leadon (lead guitar, banjo, backing vocal), Randy Meisner (bass, backing vocal), and Don Henley (drums, backing vocal).
The album, Eagles, was recorded in February 1972 at Olympic Studios in London and Wally Heider Recording in Los Angeles with Glyn John producing. Released in June 1972, it went to #22 on the Billboard 200 Albums chart and has been certified platinum by the Recording Industry Association of America. Three Top 40 singles were released from the LP.
The Eagles are an American rock band formed in Los Angeles in 1971. They have released 10 studio albums, three live albums, 10 compilation albums, and 30 singles. They have had five #1 singles and six #1 albums, and have sold more than 200 million records worldwide. The Eagles have won five American Music Awards and six Grammy Awards, and were inducted into the Rock and Roll Hall of Fame in 1998, the Vocal Group Hall of Fame in 2001. They received Kennedy Center Honors in 2016. Nine members have passed through the group since its formation. Founding member Glenn Frey died in 2016; Randy Meisner died in 2023. The group continues to record and tour and will finish their The Long Goodbye Final Tour in March 2024.
