Analysts say that indicator could be reached thanks to discipline in capital expenditure and high oil prices.
The shale industry in the United States traditionally has a high degree of debt — companies take on new projects and spend more on drilling than they generate income. But some experts bliebe the industry has entered a “new area with higher revenues” as industry officials become more cautious and look after, in the first instance, the income of shareholders and payment of dividends rather than focusing on increased production.
Deloitte estimates that the shale industry in the United States has spent some $300 billion since the “shale revolution” and 15 years of negative income. But experts say there is now hope of generating a positive cash flow this year.
In the days when oil stood at more than $100 a barrel, American shale managers investing income and credits in new wells in an efforts to produce as much oil as possible.
But as a result, there was more oil than needed and the situation was further accelerated by the collapse in demand during the Covid pandemic.
Producers would typically reinvest 120% to 130% of their operating cash flow in new production, according to Noah Barrett, an analyst at Janus Henderson. Now that figure is about 70 % or even lower Companies are directing what is left over to rewarding shareholders even inf in the first quarter oil prices rose by more than 20 %.
Shale companies have therefore been able to restore the uncertain investment attractiveness of the sector. And this has been helped by the consolidation of shale companies.