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US shale investors still awaiting payoff from oil boom

Atheer – External Sources

US oil production has topped ten million barrels per day, approaching a record set in 1970, but many investors in the companies driving the shale oil revolution are still waiting for their payday.

According to Reuters, shale producers have spent billions of dollars in order to produce more oil and gas, ending decades of declining output and redrawing the global energy trade map. Most US shale producers however have failed for years to turn a profit with the increased output, frustrating their financial backers.

Wall Street’s patience ran out late last year as investors called for producers to shift more cash to dividends and share buybacks. Yet such calls for payouts remain a debate in the industry, with oil prices recently creeping up to four-year highs. Investors demanding immediate returns could risk forcing firms to curb expansion that could have a higher long-term payoff if oil prices continue to rise.

For now, share prices of shale producers have yet to fully recover from the 2014 oil price CLc1 collapse, when many investors took losses as hundreds of firms went bankrupt and those that survived struggled.

A Reuters analysis of corporate dividend disclosures shows a split in how shale firms are reacting to increased pressure from investors, as well as the impact on their market value. This year, five of the fifteen largest US independent shale firms have started paying or raised quarterly dividends, however six of the firms have either never offered a dividend or not restored cuts implemented since the 2014 oil price collapse.

Recent oil price gains have eased the pressure from shareholders. In January, US oil futures CLc1 jumped to $66.14 a barrel, up 56 percent from last year’s low and at a level not seen in four years. Since then, prices have cooled to about $63 a barrel, but remain 17 percent higher than they were a year ago, boosting cash flow for firms that have expanded output.
Shale output growth continues to outpace forecasts. The US Energy Information Administration this month said production could top eleven million barrels per day by the end of 2018, a year earlier than it had expected just a month ago.

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