EIA: Decline in natural gas price drove decrease in US oil producer revenue in early 2024

Production expenses, which can also affect cash from operations, have stabilised after supply chain issues that caused increased costs appear to be largely resolved. Capital expenditures, which represent investment in oil and natural gas production, were flat over the same period.

In 1Q24, lower crude oil and natural gas prices helped reduce cash from operations by 12% compared with 1Q23, to US$23.3 billion. Although West Texas Intermediate crude oil prices declined 2% over this period, US crude oil production by these companies increased 5% to nearly 4.2 million bpd.

Relatively large production cuts by OPEC+ have supported crude oil prices and spurred production among non-OPEC+ sources, including US producers. Increased production would normally result in more cash from operations, but substantially lower natural gas prices likely hampered revenue for these companies. Natural gas prices fell 26% from 1Q23 to 1Q24 and reached their lowest average monthly inflation-adjusted price since at least 1997.

Although the companies in this analysis focus on crude oil production, natural gas still typically makes up around 30% of what they produce because of associated natural gas present in crude oil deposits and more diversified operations by some of the oil exploration and production companies in the group.

Production expenses – such as the cost of goods sold, operating expenses, and production taxes – increased substantially per boe in 2021 and 2022 as supply chain issues caused material and labour costs to more than double from the 2019 average. Production expenses have since declined, decreasing 40% between 2Q23 and the recent high in 2Q22.

Production expenses have been relatively flat since 2Q23, averaging US$26/boe. In addition to supply chain improvements, improved drilling productivity and increasing takeaway capacity in the Permian region have also reduced production expenses on a boe basis.

EIA bases its analysis on the published financial reports of 36 publicly traded oil companies that produce most of their crude oil in the United States. As a result, its observations do not represent the entire sector because it excludes private companies, which do not publish financial reports. The included 36 publicly traded companies accounted for 32% of the crude oil produced in the United States in 1Q24, or about 4.2 million bpd.

Read the article online at: https://www.oilfieldtechnology.com/special-reports/24092024/eia-decline-in-natural-gas-price-drove-decrease-in-us-oil-producer-revenue-in-early-2024/