U.S. oil prices above $50 a barrel are helping the shale patch to generate more cash flow, especially after the massive capital spending cuts last year. But higher prices are also reviving the good old dilemma of U.S. shale producers—raise production or raise payouts to shareholders, who have grown increasingly frustrated in recent years with the lack of meaningful returns while drillers were sinking cash flows, and even spending beyond cash flow generation into breaking production records.
Most analysts believe that this time around, there won’t be much of a dilemma as shale producers will have to show investors they can be more profitable, return more of those profits to shareholders, and “not drill themselves into oblivion,” as Harold Hamm warned the industry back in 2017.
As oil prices are steadying above $50 per barrel, producers are vowing, once again, capital and drilling restraint, while distributing more cash to shareholders now that the shale patch is set to generate higher cash flows.’
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Source: Oil Price