EIA: Energy company free cash flow continues to grow

Research conducted on a group of energy companies by the U.S. Energy Information Administration (EIA) has shown that free cash flow– the difference between cash from operations and capital expenditure – was $149 billion for the four quarters ending September 30, 2018.

This analysis was part of EIA’s Financial Review of the Global Oil and Natural Gas Industry for Q3 2018, a report compiled using financial and operating data supplied by Evaluate Energy. The full list of companies included in the study group can be found in the EIA’s report.

This $149 billion was the largest four-quarter free cash flow sum seen across the entire the five year period between 2014 and 2018 and is a clear continuation of recent trends, as shown in the EIA’s chart below. While the group’s capital spending has slowly increased over the past two years, it has been consistently outstripped by increases in cash from operations.

Stronger oil prices in 2018 are the main cause behind the increase in cash generated from operations, but this growth in free cash flow is also caused by a combination of factors that have shifted the group’s focus away from capital spending. Some companies are buying back shares, while some are stockpiling cash and exercising caution when it comes to capital budgets. Other companies are continuing to pay off debt; EIA’s report also shows that it is now eight quarters in a row where debt for the study group was reduced.

Q3 2018 data shows that the number of companies with positive free cash flow is also growing. 50% of the EIA’s study group had positive free cash flow in Q3 2018, which has increased from around 35% back in Q1 2018.

A closer look at the Evaluate Energy data that was used to build the EIA report shows that it was unsurprisingly the world’s larger companies that had the largest levels of free cash flow.

Source: Evaluate Energy

For more on the Evaluate Energy data used to build the EIA’s quarterly review, please request a demonstration of the Evaluate Energy database here.