spwm rystadDespite pressure from investors to rein in capital intensive projects and reduce debt, a majority of oil companies surveyed in the first quarter were operating on negative cash flows, according to a report from Rystad Energy.

The Norwegian oil and gas consulting firm studied 40 American oil companies with predominant assets in shale plays and focused on cash available for expansion, debt reduction or dividends. Of the group, only four companies were reported operating with a positive cash flow.

Total cash from operations fell to $9.9 billion in the first quarter from $14 billion one year earlier, said Alisa Lukash, a senior analyst at Rystad. “This is the lowest CFO we have seen since the fourth quarter of 2017,” she said.

“The gap between capex and CFO has reached a staggering $4.7 billion, which implies tremendous overspend,” Lukash added.

Shale companies have relied on bond markets to finance operations and without funding and debt refinancing, capex would eventually have to be cut. However, only a few of the more heavily leveraged shale operators have issued bonds, mostly due to an increased Fed Rate and market concerns over short-term risk for domestic oil companies, the Rystad report advised.

Firmer prices in the second quarter should see cash flow levels improve while capex remains stable, the report concluded.