EIA: This Week in Petroleum - 24 July 2019 - eng ^{Избранное}

U.S. oil producers increase shareholder distributions

First-quarter 2019 results for 43 U.S. oil producers indicate they have increased shareholder distributions through dividends and share repurchases during the past two years, averaging 28% of cash from operations since the beginning of 2018. As the overall level of net income, or after-tax profits, increased for this set of companies in recent quarters, many of them increased both shareholder distributions and capital expenditures. Oil price declines since the second quarter of 2019, however, could reduce revenue and cash from operations going forward. This analysis is based on the published financial reports of these 43 companies and does not necessarily represent the financial situation of private companies that do not publish financial reports.

West Texas Intermediate (WTI) crude oil prices averaged $54.82 per barrel (b) in the first quarter of 2019, a decrease of $8.08/b (13%) compared with the price in the first quarter of 2018. Lower prices contributed to a year-over-year decline of $1.2 billion (8%) in cash from operations in the first quarter of 2019 compared with the first quarter of 2018. The decline in cash from operations was the first year-over-year decline since the third quarter of 2016. Some of the decline in cash from operations may have been mitigated by an increase in liquids production, which grew 0.7 million barrels per day, or 13%, year-over-year for this group of companies. Capital expenditures declined $0.3 billion (2%) during the same period (Figure 1).

Figure 1. Cash flow statement items for 43 U.S. oil producers

Many producers have been balancing increases in capital expenditures with other uses of cash, such as debt reduction, share repurchases, or dividend increases. Some producers have reduced debt—particularly in 2016 and 2017—but more recently, they have instead increased shareholder distributions through these dividend increases and share repurchases. Analyzed on a quarterly average basis, these companies have generally increased cash from operations, capital expenditures, net share repurchases, and dividends for the past several years through 2018. Except for dividends, however, these all declined in the first quarter of 2019 compared to their 2018 quarterly averages (Figure 2).

Figure 2. Cash flow statement items for 43 U.S. oil producers

The financial statements reveal that, when combining gross share repurchases with dividends, the companies spent more than $4 billion on shareholder distributions in the first quarter of 2019, which was 31% of cash from operations (Figure 3). Although they can vary from quarter to quarter, shareholder distributions through share repurchases and dividends have averaged 28% of cash from operations since the beginning of 2018.

Figure 3. Shareholder distributions for 43 U.S. oil producers

Although they are both shareholder distributions, dividends and share repurchases are classified as different uses of cash. Dividends are direct cash payments to shareholders and are typically steady from quarter to quarter. These companies reduced dividends in 2016 but have since slowly increased them back to 2014 levels of about $2 billion per quarter. Share repurchases, on the other hand, provide less direct benefits to shareholders than dividends. Instead of cash payments, a company may repurchase its own shares to reduce the number of shares available on public markets, which could increase the stock price for existing shareholders (although evidence for this effect is mixed). Share repurchases tend to be less consistent than dividends. For these companies, share repurchases declined from almost $4 billion per quarter at the start of 2014 to almost zero in 2016, but they have steadily increased to about $2 billion to $4 billion per quarter in the past year.

Several factors could influence the level of shareholder distributions in the future. WTI prices in the second quarter were $8.19/b (12%) lower than the same period in 2018, which could reduce revenue and cash from operations despite growth in oil production. If these totals were to decline, companies may have to limit shareholder distributions or capital expenditure, which had been growing simultaneously, as seen in Figure 2 above.

Second-quarter 2019 results will be released in August. For similar financial analysis applied to a broader set of oil companies, see the U.S. Energy Information Administration’s (EIA) recently released Financial Review.

U.S. average regular gasoline and diesel prices decrease

The U.S. average regular gasoline retail price decreased nearly 3 cents from the previous week to $2.75 per gallon on July 22, 8 cents lower than the same time last year. The Midwest decreased more than 7 cents to $2.69 per gallon, the Rocky Mountain price fell nearly 4 cents to $2.74 per gallon, the West Coast price fell nearly 3 cents to $3.33 per gallon, and the East Coast price decreased nearly 1 cent to $2.67 per gallon. The Gulf Coast price increased nearly 1 cent, remaining at $2.46 per gallon.

The U.S. average diesel fuel price decreased nearly 1 cent to $3.04 per gallon on July 22, 18 cents lower than a year ago. The West Coast price decreased more than 1 cent to $3.61 per gallon, the East Coast and Midwest prices each decreased nearly 1 cent to $3.07 per gallon and $2.95 per gallon, respectively, and the Gulf Coast price decreased less than 1 cent to $2.80 per gallon. The Rocky Mountain price increased slightly, remaining at $2.98 per gallon.

Propane/propylene inventories rise

U.S. propane/propylene stocks increased by 1.6 million barrels last week to 79.1 million barrels as of July 19, 2019, 4.9 million barrels (6.5%) greater than the five-year (2014-2018) average inventory levels for this same time of year. Midwest, East Coast, and Gulf Coast inventories increased by 0.8 million barrels, 0.5 million barrels, and 0.3 million barrels, respectively, and Rocky Mountain/West Coast inventories rose slightly, remaining virtually unchanged. Propylene non-fuel-use inventories represented 5.2% of total propane/propylene inventories