The U.S. Energy Information Administration (EIA) has reported that lower natural gas prices led to a significant decline in revenue for 36 publicly traded U.S. oil exploration and production companies during the first quarter of 2024. Cash generated from operations dropped compared to the same period in 2023, primarily due to the reduced value of natural gas.
While production expenses, another factor influencing cash flow, have stabilized following the resolution of earlier supply chain disruptions, capital expenditures remained unchanged over the same period. These expenditures represent investments made in oil and gas production.
The report shows that the fall in both crude oil and natural gas prices caused a 12% drop in cash from operations, decreasing to $23.3 billion in 1Q24 compared to 1Q23. Despite West Texas Intermediate (WTI) crude oil prices slipping by 2%, the companies increased their crude oil production by 5%, reaching nearly 4.2 million barrels per day (bpd).
The global oil market has been influenced by substantial production cuts by OPEC+, which helped support crude oil prices. This move also encouraged higher output from non-OPEC+ producers, including U.S. companies. While increased production typically boosts revenue, the sharp decline in natural gas prices counteracted this, dampening cash from operations. Natural gas prices plummeted by 26% between 1Q23 and 1Q24, reaching their lowest inflation-adjusted levels since at least 1997.
Although these companies primarily focus on crude oil, natural gas still makes up around 30% of their total production. This is due to the associated natural gas found in crude oil reserves and the more diversified operations of some companies.
Production expenses, which include costs such as goods sold, operating expenses, and production taxes, surged in 2021 and 2022 due to supply chain issues. These disruptions caused material and labor costs to more than double compared to 2019 levels. However, production expenses have since decreased by 40% between 2Q22 and 2Q23, stabilizing at an average of $26 per barrel of oil equivalent (boe) since 2Q23.
Improved supply chain conditions, along with increased drilling efficiency and expanded takeaway capacity in the Permian region, have also contributed to reducing production costs.
The EIA’s analysis is based on financial reports from 36 publicly traded oil companies, which accounted for about 32% of U.S. crude oil production, or around 4.2 million bpd, in the first quarter of 2024. This analysis excludes private oil companies, which do not release financial data, meaning the findings do not reflect the entire industry.
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