Oil company payouts top exploration spending for first time

A new report by the national accounting firm of Ernst & Young revealed that the nation’s top energy companies paid out more of their earnings last year to shareholders than they invested in new oil and gas fields for the first time.

At the same time, total capital expenditures decreased among the study companies, which included several in Oklahoma. The spending fell by 25% in 2022 to $106.6 billion. The drop in spending came just one year after those same companies, such as Devon Energy, Continental Resources and Chesapeake Energy spent a near-record amount of $143 billion on capital expenditures in 2021.

Oklahoma City-based Chesapeake Energy was one of the five firms listed as having the highest capital expenditures in 2022. It was $2.321 billion for the acquisition of proved properties. Permian Resources Corporation spent the most at $3.2 billion.

Chesapeake was also one of the top five firms for highest capital expenditures for unproved properties—$795 million. Devon Energy was ranked just above it with $803 million in unproved properties expenditures.

Those are for acquisitions so the total expenditures, whicch included exploration and development, are much more. Chesapeake’s total in 2022, reported Ernst & Young, was more than $5 billion. Devon Energy’s came to $5.1 billion.

Those expenditures compared to $3.4 billion by Continental Resources, Inc; $471 million by Gulfport Energy Corporation; $1.8 billion by Ovintiv, Inc.; and $577 million by Vital Energy, Inc.

The overall decrease in total capital expenditures across the U.S. oil and gas industry was primarily driven by a sharp decline in merger and acquisition activity in 2022, which saw its lowest level of activity since the COVID-19 pandemic in 2020 and came one year after the study companies recorded record merger and acquisition spending in 2021 stated the report.

Ernst & Young’s study also found that while total capital expenditures decreased in 2022 compared to 2021, exploration and development spending increased 34% and 54%, respectively. Exploration spending was US$10.9 billion in 2022 compared with US$8.1 billion in 2021, while development spending increased from US$41.1 billion in 2021 to US$63.4 billion in 2022.

As for the payouts topping exploration for the first time ever, Ernst and Young concluded the outlook for stronger energy prices has not changed the focus on investor returns. U.S. energy companies have been focused on regaining favor with investors after years of overspending on production growth hurt returns and put them in the doghouse.