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Oil and gas producers set to report record free cash flow in 2022

August 25, 2022 7:19 AM
Reuters

High energy prices could almost double oil producers’ free cash from operations this year to $1.4 trillion, money that can be used to finance a shift to renewable fuels, pay down debt or mightily reward investors, according to a new study.

The price trend should continue and the global energy business should generate another $1.5 trillion in surplus cash by 2030, consultants Deloitte said. That cash creates an array of opportunities for an industry that has been constrained by debt and losses during the COVID-19 pandemic.

“Some will invest more, others will invest less depending on who they intend to be in the future and what they want their portfolio to look like,” said Noemie Tilghman, Deloitte’s head of U.S. oil, gas & chemicals consulting.

Within two years, producers should generate $1 trillion in surplus cash after investments, debt payments and shareholder distributions, making the next couple of years key for strategy decisions.

“Who you want to be, and where you want to make investment decisions have to come relatively quickly,” Tilghman said.

The U.S. shale industry can potentially become debt-free by early 2024 if prices stay strong and discipline prevails, Deloitte says. This would overcome the decade-long loss of $300 billion racked up by overspending on new production that left many burdened with debt.

Disruptions of the past two years in the oil and gas industry — including shifts in consumer behavior and supply chain challenges — combined with years of underinvestment and financial discipline, have helped drive oil prices to past highs and cash flows to record levels, Deloitte said.

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