Capital Expenditure by Public U.S. Oil Companies Higher in Q1 2023: EIA

Data collected by the U.S. Energy Information Administration shows that during the first quarter of 2023 capital expenditure for 40 publicly traded U.S. oil exploration and production companies increased compared to the fourth quarter of 2022. The data also shows that cash from operations declined during the first quarter of 2023, compared to the previous quarter, according to a report released by the agency on Aug. 10.

The 40 companies account for 32 percent, or 4 million barrels per day of total U.S. crude oil production during the first quarter of 2023. Capital expenditure was 12 percent or $1.8 billion higher during the first quarter of 2023, compared to the previous quarter and totalled $16.7 billion.

Capital expenditure undertaken by exploration and production companies consists of expenses on licences, equipment, machinery, land, plants, and other items required to produce crude oil efficiently. As a rule of thumb, historically when crude oil prices have risen, exploration and production companies have increased capital expenditure, in order to increase production, so that they can take advantage of the high oil price environment and increase their profit margins.

Exploration and production companies would increase oil production by installing more drilling rigs. As it stands, there is around a four month lag between changes in oil prices and changes in the number of oil rigs, with the number of rigs correlated with the price of oil. The West Texas Intermediate, or WTI, crude oil price during the second quarter of 2022 peaked at $108.45 per barrel and this led the number of oil rigs to peak at 728 during December 2022. The decline in WTI crude oil prices during the first half of 2023 has led to a significant decline to the number of oil rigs operating by the end of July 2023.

In contrast to capital expenditure, lower crude oil prices during the first quarter of 2023 reduced cash for operation for these companies. Cash from operations declined by 18 percent or $5.8 billion during the first quarter of 2023, compared to the previous quarter.

The reduction in cash from operations, as a result of lower crude oil prices indicate that capital expenditures could decline in the coming quarters.