Unravelling US shale's corporate cash flow dilemma

Perhaps the primary reason for poor investor sentiment towards Lower 48 corporates is the inability of most operators to consistently generate cash flow from operations in excess of capital expenditures. Cheap and abundant credit, asset sales, and selective use of new equity have financed outspends over the past decade. A detailed analysis of 60 operators central to the development of US shale shows that capital expenditures outpaced cash flow from operations by nearly 25% for the decade. Investors have grown skeptical as operators have raised $54 billion more capital than it has returned to investors. With investor demands for better cash flow discipline and free cash flow yields that are more competitive with other sectors, Lower 48 operators must successfully pivot to a more sustainable business model.