Major Themes For Producers In Q2: Emissions Plan Reaction, Capital Spending Hikes, Inflationary Concerns, Cash Flow Bonanza

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The DOB has synthesized our coverage of producers’ second quarter reports and conference calls to highlight the dominant themes that emerged.

Reaction to the federal government’s emissions plan, capital spending hikes and inflationary concerns were three topics that dominated our coverage. Another major theme included higher cash flow and free cash flow resulting from much higher commodity prices.

We organize these themes below under separate headings, provide a short summary paragraph for each, and include hyperlinks to some pieces of content that represent the particular theme.

Federal emissions plan reaction

Top executives at companies comprising the Pathways Alliance said the two options outlined in the federal government’s recently released oil and gas sector emissions cap discussion paper are untenable and would lead to production shut-ins at a time when global energy security is of paramount concern.

The federal government also said it wants to see a 42 per cent reduction in oil and gas sector emissions by 2030.

While Pathways Alliance companies share the government’s goal of reducing emissions, the announced goal of getting to a 42 per cent reduction drew especially pointed commentary from the CEOs: ‘overly ambitious,’ ‘very aggressive,’ ‘very worried.’

Emissions plan highlights:

Capital spending hikes

Several companies announced increases to their capital expenditure budgets during the release of their Q2 financial results reports, to accelerate drilling plans in 2022, to deal with higher-than-budget inflation (more information about this is included in our next major theme, below), to address service cost hikes, and to take advantage of higher commodity prices.

Capex highlights:

Inflationary concerns

Connected to the capital spending increases above, the leading cause for many of these increases were to cover inflationary pressures — inflation was also a dominant theme during Q1 earnings season.

Inflation highlights:

Cash flow/free cash flow bonanza

Surging cash flow and free cash flow — in many cases records — were a highlight of the Q2 season, on the strength of higher commodity prices. In many cases, companies used their significant excess cash flow to further reduce debt or boost shareholder returns.

Cash flow highlights:

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