Cuts in capex and cash from hedging give Appalachian frackers positive free cash flow in first quarter
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Key Findings
An IEEFA analysis reveals that nine shale-focused gas producers in Appalachia generated positive free cash flow (FCF) in the first quarter of 2020.
All told, these companies generated $142 million more than they spent on drilling and other capital expenses in the first quarter, as cuts in capex and cash infusions from hedging strategies moved the cash flow needle from red to black.
Executive Summary
The positive first quarter results were not strong enough, however, to offset the negative cash flows over the prior year. In the twelvemonth period ending in Q1 2020, these fracking-focused companies operating in Appalachia spent $1.52 billion more on drilling and other capital expenditures than they realized from their core business operations. These disappointing financial results were in line with the fracking sector’s dismal long-term performance.
Cash flow improvements during the first quarter were largely propelled by significant reductions in capital expenditures (capex). The nine companies in IEEFA’s sample spent $2.07 billion in the quarter, down from the $2.9 billion quarterly average since mid-2017.
