Research Highlights - Week 42
If we were to consider the Permian Basin as a representative upstream company, it would find itself currently in a surprisingly good phase of free cash flow generation (see Americas Weekly – Issue 41).
While our calculations suggest that cash flow from upstream activities dropped significantly at the outset of the COVID-19 pandemic on the back of falling crude sales, less spending on well completions resulted in cash flow quickly returning to late-2019 levels.
Although our base case does see completions picking up moving forward, they are set to remain below pre-crisis levels, and this, alongside improved technical parameters (e.g. “sweet spot” drilling), should help keep cash flow in positive territory.