The US Energy Information Administration (EIA) has published its Financial Review of the Global Oil and Natural Gas Industry: Second-Quarter 2024, highlighting key trends in the sector.
According to the report, global petroleum liquids and natural gas production increased compared to Q2 2023, with a 4 percent year-over-year growth in petroleum liquids and a 3 percent rise in natural gas output.
Higher Cash Flow, Lower Investment
Despite the increased production and higher real prices for crude oil (+6 percent year-over-year), energy companies spent 7 percent less on investing and financing activities compared to Q2 2023. Cash from operations rose by 2 percent to $128 billion in real terms, driven by the improved pricing environment. However, capital expenditure fell to $69 billion, marking a 12 percent decrease year-over-year. This drop in capital spending contributed to a decline in investment as a share of cash from operations, which fell to 50 percent, aligning with the 2023 average.
Shareholder Returns and Debt Reduction
Distributions to shareholders remained robust, with companies allocating $55 billion over the last four quarters through dividends and share buybacks. At the same time, energy firms reduced their debt by $8.4 billion, bringing the long-term debt-to-equity ratio down to 37 percent, lower than the 57 percent recorded by U.S. manufacturing companies.
Strong Earnings and Market Growth
Approximately 87 percent of companies analyzed posted positive upstream earnings in Q2 2024, with 68 percent reporting positive free cash flow. The energy sector’s combined market capitalization grew by 3 percent in real terms from the previous year. Return on equity averaged 14 percent, comparable to returns in the U.S. manufacturing sector.
Future Outlook
While the second-quarter performance was strong, a 7 percent decline in crude oil prices year-over-year in Q3 2024 suggests potential challenges ahead, with expectations that cash from operations could face pressure in the coming quarters.
This report underscores the continued strength of the oil and gas industry in 2024, balancing increased shareholder returns with reduced capital expenditure and debt.