Shale CEOs Lack Incentive to Find Your Holy Grail

Finding a fracker who can simultaneously gush more oil and money is shale’s equivalent of the holy grail.

Yet there’s hope. Surveying 57 North American exploration and production companies, Bob Brackett of Sanford C. Bernstein found that, in the first quarter, they collectively managed a trifecta of raising oil production by 10 percent while also earning positive net income and free cash flow. The last time all three of those metrics were in the green was eight years ago. In fact, the first quarters of 2018 and 2010 were the only times that happened in at least the past 33 quarters.

The apparent ease with which E&P companies boost barrels but struggle to do the same with free cash flow is an essential element of the recent oil crash. It’s also why this industry has generated such poor returns for shareholders…

 

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