Shale Needs Money to Keep Production
In Q2 2023, U.S. shale oil reinvestment rates hit a 3-year high
Rystad Energy analysts indicated that the 18 oil and gas companies that account for 40% of U.S. shale production had a reinvestment rate (the ratio between capital expenditures and cash flow from operations) was at 72% during the period from April to June – this is the highest indicator from Q2 2020.
Rystad Energy believes that this is not a sign of a rapid increase in production. The company notes that discipline is now the main rule for public shale companies. Analysts are sure that the injection of investments was necessary due to a sharp drop in production at shale wells.
Recall that during the heyday of the shale revolution, the level of reinvestment often exceeded 100%, it showed the industry’s accessibility to cheap loans. In the last two years, the trend has changed, shale companies prefer to pay off debts to shareholders, rather than make new ones.
