Other companies generating positive cash flow among the 20 largest oil and gas producers by enterprise value (excluding the supermajor integrated companies) were EQT at $172 million, Chesapeake at $148 million, Cabot Oil & Gas at $117 million, and Cimarex at $41 million. The biggest overall cash flow loser in the Top 20 was Pioneer Natural Resources, which outspent its cash flow by $264 million.
No Permian Winners
Notably, despite the surge of oil production in the Permian Basin, none of the companies that generated positive cash flow in Q1 operate either exclusively or mostly within the Permian Basin.
Continental operates primarily in two areas: The Bakken in North Dakota and the SCOOP/STACK in Oklahoma. EOG has operations scattered across the midcontinent, as well as some international production. ConocoPhillips has a diverse production portfolio. The others generating positive cash flow are primarily natural gas companies, or have a large chunk of production outside of the Permian.
The lack of cash flow among Permian producers can be partially attributed to logistical constraints in the Permian that won’t likely be relieved until 2019. But it’s also a function of companies investing heavily into the Permian in anticipation of future production.
To be clear, it isn’t necessarily a concern if a company occasionally has negative cash flow. Companies invest for the future, and if their outlook is for higher oil prices then they may invest significantly. But this increases the level of risk for these companies, as a prolonged oil price slump could financially strain the big spenders.
In conclusion, I will note that most oil companies are moving in the right direction, even if some aren’t doing so quickly enough. My screen of the Top 80 U.S. and Canadian oil and gas companies showed cumulative cash flow from the group at -$669 million for Q1 2018. A year ago, that number was -$6.9 billion.