More red flags on fracking: Weak third-quarter results as cash losses persist even with production and price increases
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Key Findings
Even with a production boom and the highest prices since 2014, US frackingfocused oil and gas companies continued their nine-year losing streak through Q3, 2018.
The 32 mid-size U.S. exploration companies included in this review reported nearly $1 billion in negative cash flows through September.
Falling oil prices and rising interest rates will pose additional financial challenges to the industry in Q4.
Executive Summary
Even though oil prices rose and oil and gas production boomed during the third quarter of 2018, the U.S. fracking sector continued its nine-year streak of cash losses.
This report examines a cross-section of 32 publicly traded fracking-focused companies. All told, these firms spent nearly $1 billion more on drilling and related capital outlays during the quarter than they generated by selling oil and gas.
These results may come as a surprise to investors who incorrectly equate rising output with financial success. U.S. oil and gas production hit an all-time high during the quarter, even as oil prices rose to $70 per barrel, their loftiest level since late 2014. Even with those advantages, our sample of mid-size oil and gas producers continued to hemorrhage cash due to the high cost of drilling and the industry’s seemingly insatiable thirst for capital.
This analysis of third quarter results is part of our ongoing research of the fracking industry and is focused specifically on cash flow.
Press release: IEEFA U.S.: Frackers continue to underperform
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