US Independents: shining a spotlight on remaining inventory

Investor pressure for dividends and buybacks remains high and is not expected to change soon. But companies still need to decide how to most effectively use cash flow that’s not going to shareholders. After several quarters of debt reduction, balance sheets for nearly all US E&Ps are at healthy levels (20-25% gearing). This frees up cash flow for new uses in 2023. Freed up cash flow can now go towards M&A, ESG, or increased drilling. We believe the companies with deeper inventory should be challenging the “stay flat” narrative. 5-10% growth seems appropriate in most cases. Higher growth rates will undoubtedly invite more questions around quality and depth of remaining inventory. But data in this insight shows that plenty of companies have nothing to hide.