In 2018, publicly traded US oil and gas exploration and production companies issued the lowest amount of new funding since at least 2013, raising $14 billion in debt and $2 billion from public equity markets, according to an analysis by the US Energy Information Administration.
Several factors likely contributed to reduced financing activity in 2018 compared with previous years, EIA said.
First, the relatively higher level of interest rates in 2018 contributed to a higher cost of issuing debt or equity for all companies, including E&P firms. The US Federal Funds rate averaged 1.8% in 2018—the highest since 2008—and energy business bond yields increased in the fourth quarter as crude oil prices declined.
In addition to higher interest rates, E&P companies may have needed less outside sources of capital than in previous years. Through third-quarter 2018, a group of 46 US oil producers generated $56 billion in cash flow from operating activities. The amount of cash flow from operations through the first three quarters of 2018 was higher than full-year amounts from 2015-17.
As a result, full-year 2018 cash flow will likely be the highest annual total since 2014 for these companies. Collectively, they spent $60 billion in capital expenditures and generated a net $8 billion from asset sales. Because cash from operations plus asset sales exceeded capital expenditures, many companies may have had enough cash to fund their investing activities without the need to issue debt or equity.
