Our outlook for the IHS Markit Company Research North American E&P peer group capex remains unchanged as most companies reaffirmed prior guidance. The US oil-focused E&P peer group has already spent 70% of this year’s capex budget, while the gas-focused operators have spent 60%. The front-loaded spending implies a continuation of the sharp pullback in drilling and completion activity, providing optimism for the second-half 2020 free cash flow (FCF) outlook. FCF generation during the first half of the year was disappointing, as cash flow from investing activity outpaced cash flow from operations by almost $5.0 billion. The natural gas–focused operators performed better than the oil-focused E&Ps in FCF generation, not surprising given the oil price shock. The outspending of cash flow during the first half was primarily funded by debt and cash on hand. The pressure is now on E&P managements to repair the balance sheet damage and improve the return of capital to shareholder (RCS) performance or suffer further investor criticism. Looking forward, company commentary suggests that even if commodity prices rise, the companies will use the higher price realizations to maximize FCF, repair the balance sheet, and/or boost RCS. The companies that announced their 2021 outlooks all framed the conversation around maintenance capital budgets, implying a limited boost to spending next year.
Company Peer Group Insights—North American E&P Q2 2020 capex study: Front-loaded spending provides optimism for second-half free cash flow
13 Aug 2020 - Upstream Companies and Transactions | Insight
Antero Resources Corporation; Apache Corporation; Bonanza Creek Energy, Inc.; Cabot Oil & Gas Corporation; Callon Petroleum Company; Canadian Natural Resources Limited; Centennial Resource Development, Inc.; Chesapeake Energy Corporation; Cimarex Energy Co.; CNX Resources Corporation; Comstock Resources Incorporated; Concho Resources Inc.; ConocoPhillips; Continental Resources, Inc.; Denbury Inc.; Devon Energy Corporation; Diamondback Energy Inc.; Earthstone Energy Inc.; EOG Resources Incorporated; EQT Corporation; Extraction Oil & Gas, Inc.; Gulfport Energy Corporation; Hess Corporation; Laredo Petroleum, Inc.; Magnolia Oil & Gas Corporation; Marathon Oil Corporation; Matador Resources Company; Montage Resources Corp.; National Fuel Gas Company; Noble Energy Incorporated; Oasis Petroleum Inc.; Occidental Petroleum Corporation; Ovintiv Inc.; Parsley Energy, Inc.; PDC Energy, Inc.; Pioneer Natural Resources Company; QEP Resources, Inc.; Range Resources Corporation; SM Energy Company; Southwestern Energy Company; Talos Energy, Inc; Whiting Petroleum Corporation; WPX Energy Inc.
North America; United States of America