spwm rystadThe second quarter of 2019 brought good news for U.S. shale operators. It was the first three-month period on record when they achieved positive cash flow from operations after accounting for capital expenditures, according to Rystad Energy, the independent Norwegian energy research and consultancy.

Rystad studied the financial performance of 40 U.S. shale oil companies, focusing on cash flow from operating activities (CFO). This is the cash that is available to expand the business (through capital expenditure, or capex), reduce debt or return to shareholders.

In the second quarter of 2019, 35 percent of the 40 operators balanced their spending with operational cash flow, reporting an accumulated $110 million surplus in CFO versus capex.

“That is an industry first,” said Rystad Energy senior analyst Alisa Lukash. “The five-dollar increase in the average WTI oil price from the first to the second quarter of 2019, coupled with operators’ efforts to keep spending within their initial budgets, resulted in a slight surplus of adjusted CFO for total capex.”

Lukash also noted that many operators achieved positive earnings in the second quarter, and that accumulated profit was significantly depressed by Anadarko Petroleum’s $1-billion transactional costs associated with the Chevron merger termination fee.

The shale industry has been under pressure to balance capex with operational cash flow, while maintaining robust production growth and generating extra cash on stock repurchase and dividend programs.

With negative cash flows, shale companies have relied on bond markets to finance their operations. Without additional funding and any debt refinancing, capex would have to be cut.