This Week in Petroleum

Release date: September 20, 2017  |  Next release date: September 27, 2017

U.S. oil companies increased liquids production and cash flow in the second quarter of 2017

Second-quarter 2017 financial statements for 55 U.S. oil companies indicate that aggregate liquids production grew year over year for the first time since the fourth quarter of 2015. Cash flow from operating activities also increased year over year, the third consecutive quarter of year-over-year growth, reaching the highest level in nearly two years. These companies’ ability to sufficiently meet financial obligations and their increased hedging activity, which locks in prices for their future production, suggest that production could continue growing in the coming quarters.

The 55 companies included in the analysis are listed on U.S. stock exchanges and must submit financial reports to the U.S. Securities and Exchange Commission. They operate largely in U.S. onshore basins, but some also operate in the Federal Offshore Gulf of Mexico, Alaska, and various other regions across the globe.

Cash from operations for these 55 companies totaled $11.9 billion in the second quarter of 2017, $3.8 billion higher than the same period in 2016 and the highest level for any quarter since the third quarter of 2015 (Figure 1). Higher crude oil prices and production contributed to the increase in cash from operations. West Texas Intermediate (WTI) front-month futures prices averaged $48.15 per barrel (b) in the second quarter of 2017, $2.51/b higher than in the second quarter of 2016.

Figure 1. Cash from operations for 55 publicly traded  oil companies

Total liquids production for the 55 companies averaged 5.3 million barrels per day (b/d), a 1% increase compared with the second quarter of 2016 and the first annual increase in production since the fourth quarter of 2015. Since the beginning of 2017, more than two-thirds of these companies increased their capital expenditures, investing in drilling and completing wells that contributed to the production growth in the second quarter of 2017 (Figure 2). Capital expenditures for these companies increased 37% year over year in the second quarter of 2017, totaling $14.5 billion.

Figure 2. Capital expenditures and liquids production for 55 publicly traded oil companies

Activity in the WTI crude oil futures market suggests that some U.S. producers will continue to increase capital expenditures and liquids production. Short positions in WTI crude oil futures contracts held by producers and merchants have declined since the beginning of 2017, but they remain elevated compared with previous years. Short positions held by swap dealers—entities that hedge futures on behalf of oil companies—reached a three-year high of 475,000 contracts in August (Figure 3). Initiating a short position, or selling a futures contract, allows the holder to lock in a future price for a commodity today, which oil producers and end users can use as a way to hedge, or mitigate, price risk.

Figure 3. Short positions in WTI futures contracts

In addition to hedging, other indicators from the companies’ financial statements suggest that they should be able to maintain, and possibly increase, funding for upstream projects, even without further increases in prices. Almost half of these companies have enough cash and other short-term assets to cover their financial obligations due within the next year, generally considered a suitable amount of liquidity (Figure 4).

The median ratio of short-term assets to short-term liabilities declined over the past year as companies used cash to increase capital expenditures. Higher crude oil prices in 2017 compared with 2016 also suggest that companies that borrow based on the value of their proved reserves should be able to maintain or increase their access to short-term financing. Third-quarter 2017 results will be released in November.

Figure 4. Median ratio of short-term assets to short-term liabilties for 55 publicly traded oil companies

U.S. average regular gasoline and diesel retail prices fall

The U.S. average regular gasoline retail price decreased over 5 cents from the previous week to $2.63 per gallon on September 18, up 41 cents from the same time last year. The Midwest price fell nearly 10 cents to $2.45 per gallon, the East Coast price fell 4 cents to $2.69 per gallon, the Gulf Coast price fell nearly 4 cents to $2.47 per gallon, the West Coast price fell 2 cents to $3.02 per gallon, and the Rocky Mountain price fell 1 cent to $2.60 per gallon.

The U.S. average diesel fuel price decreased nearly 2 cents to $2.79 per gallon on September 18, 40 cents higher than a year ago. The Gulf Coast price fell three cents to $2.62 per gallon, the East Coast price fell nearly two cents $2.81 per gallon, the Rocky Mountain price fell over one cent to $2.81 per gallon, and the Midwest price fell one cent to $2.74 per gallon. The West Coast price increased less than one cent, remaining at $3.10 per gallon.

Propane inventories fall

U.S. propane stocks decreased by 1.4 million barrels last week to 80.8 million barrels as of September 15, 2017, 20.9 million barrels (20.6%) lower than a year ago. Gulf Coast and East Coast inventories decreased by 1.8 and 0.4 million barrels, respectively, while Midwest and Rocky Mountain/West Coast inventories increased by 0.6 and 0.3 million barrels, respectively. Propylene non-fuel-use inventories represented 3.9% of total propane inventories.

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Retail prices (dollars per gallon)

Conventional Regular Gasoline Prices Graph. On-Highway Diesel Fuel Prices Graph.
  Retail prices Change from last
  09/18/17 Week Year
Gasoline 2.634 -0.051 0.409
Diesel 2.786 -0.016 0.397

Futures prices (dollars per gallon*)

Crude Oil Futures Price Graph. RBOB Regular Gasoline Futures Price Graph. Heating Oil Futures Price Graph.
  Futures prices Change from last
  09/15/17 Week Year
Crude oil 49.89 2.41 6.86
Gasoline 1.662 0.014 0.200
Heating oil 1.799 0.033 0.394
*Note: Crude oil price in dollars per barrel.

Stocks (million barrels)

U.S. Crude Oil Stocks Graph. U.S. Distillate Stocks Graph. U.S. Gasoline Stocks Graph. U.S. Propane Stocks Graph.
  Stocks Change from last
  09/15/17 Week Year
Crude oil 472.8 4.6 -1.1
Gasoline 216.2 -2.1 -9.0
Distillate 138.9 -5.7 -26.1
Propane 80.806 -1.377 -20.943