IOCs reported increased cash flow and higher proved reserves in 2021 despite headwinds
Despite the decline in oil and gas investment, the annual financial reports of 119 publicly traded exploration and production companies revealed that their aggregate proven reserves of crude oil and natural gas increased by $19.2 billion. barrels of oil equivalent (boe) in 2021.
Collective exploration and development (E&D) spending by companies rose just 1% in 2021 compared to 2020, remaining 28% below its five-year average (2015-2019), according to a report by the Energy Information Agency (EIA).
Many publicly traded oil and gas companies, generating more cash from operations due to higher prices in 2021, have devoted more of their financial resources to reducing debt, increasing dividends, merger and acquisition opportunities than capital expenditure for production growth.
The analysis was based on published financial reports of 119 domestic and international companies provided to the United States Securities and Exchange Commission, collected by Evaluate Energy and published by the EIA.
“We estimate that the 119 companies in this analysis accounted for approximately 60% of total non-OPEC liquids production in 2021.
“Of the 119 companies whose financial reports were reviewed, the top 20 held 78% of the collective 293 billion boe of proven oil and natural gas reserves held at the end of 2021.
“While many of these companies have global operations, some are national oil companies with reserves and operations concentrated in their home countries,” he said.
According to the report, organic additions to proven reserves of crude oil and natural gas come from enhanced recovery and expansions and discoveries that can be tied to E&D spending.
Global E&D costs incurred and acquisitions of unproved reserves by these companies in 2021 rose 1% year-on-year to $244 billion, he said.
With less capital expenditure going to E&D, the publicly traded companies the organization looked at devoted more cash from operations to financing activities such as debt reduction and dividends.
“Collectively, their operating cash grew to $597 billion in 2021, the most since 2014. With higher revenues, companies focused on paying down debt and increasing dividends, likely to improve their financial situation and increase returns for shareholders.
“Net debt held by companies fell by $134 billion, the highest amount of any year from 2012 to 2021, and dividends increased to $107 billion (24% above the average of 2015-2019),” the report reads.