The U.S. Energy Information Administration (EIA) has released its Financial Review of the Global Crude Oil and Natural Gas Industry for Q3 2024, highlighting key developments in production, investment, and financial returns. The report underscores the challenges faced by the energy sector as it grapples with falling commodity prices, despite production growth in certain areas.
Production Trends Show Mixed Performance
Global petroleum liquids production saw a 3% year-over-year (y-o-y) increase, while natural gas output declined by 2% compared to the third quarter of 2023. However, nearly 59% of the companies analyzed reported production levels below 50,000 barrels per day during Q3 2024, reflecting a concentration of smaller-scale operations within the sector.
Commodity Prices Continue to Decline
Brent crude oil prices experienced an 11% drop in real terms compared to the previous year, while Henry Hub natural gas prices fell even more sharply, down 18% y-o-y. These declines contributed to weaker financial performance across the sector.
Financial Metrics Reflect Lower Revenues
In Q3 2024, cash from operations totaled $144 billion, a 1% decrease in real terms from the same quarter in 2023, primarily driven by lower energy prices. Capital expenditure also dropped by 1%, amounting to $75 billion. Despite these declines, companies remained focused on maintaining robust cash flows.
Upstream Investments and Growing Debt Levels
Upstream capital expenditures averaged $15.65 per barrel of oil equivalent over the past year, accounting for 24% of crude oil prices in Q3 2024. Companies continued to leverage debt to fund operations, with a $13 billion increase in long-term debt raising the debt-to-equity ratio to 39%.
Strong Shareholder Returns Amid Financial Strain
Despite the downward pressure on commodity prices, energy companies continued to reward shareholders generously. Distributions through dividends and share repurchases averaged $55 billion over the last four quarters, significantly surpassing pre-pandemic levels. These payouts accounted for a substantial portion of cash from operations.
Market Capitalization and Hedging Performance
The combined market capitalization of energy companies fell by 9% in real terms y-o-y in Q3 2024. However, companies were able to mitigate some of the financial pressures with hedging derivatives, which provided a net gain of $4 billion during the quarter.
Outlook Points to Continued Price Weakness
Looking ahead, early data from Q4 2024 suggests that crude oil prices will continue to decline, with a projected 10% decrease compared to the previous year. This trend could further impact cash from operations and overall sector performance in the coming months.
The EIA’s report highlights the ongoing financial challenges faced by the global energy sector, as companies navigate falling commodity prices while still striving to maintain solid production levels and deliver strong returns to shareholders.