Downhill Lullaby: E&P posts record profits in 2022, but Q4 erosion returns Harken to a less idyllic 2023

Last August, we headlined our review of E&P’s Q2 2022 financial results Camelot After rising oil prices and increased natural gas realizations, revenues, profits and cash flows reached levels that seemed like a pipe dream for producers who only two years earlier they had teetered on the brink of financial instability. The latest year-end results revealed the strongest returns in the industry’s history, much of which was distributed to long-term shareholders. But dreams are fading and prices are shrinking, and Q4 2022 results suggest a much less idyllic 2023. In today’s RBN blog, we review 2022’s record performance and the most troubling Q4 results.

After struggling to keep their heads above water since 2014, the 42 E&Ps in the universe of companies we track, which includes all US publicly traded E&Ps with a market capitalization of more than $500 million , but not integrated energy companies such as ExxonMobil and Chevron, posted a pullback. record profitable years in 2021 and 2022. These producers earned $82 billion in pretax operating profit in 2021 and then doubled those results to $167 billion in 2022. As shown in the figure 1, the gap between operating income and production (in dollars per barrel). of oil equivalent, or $/boe; gray line) and costs (multi-colored bars) is negligible to negative between 2015 and 2020, with increasing profitability in 2021 and 2022 (white space gap above bars) driven by commodity prices healthy and fiscal discipline. operating and capital expenses.