US oil producers increased fourth-quarter investment by nearly $5 billion in 2016
U.S. onshore-focused oil production companies increased capital expenditure by $4.9 billion, or 72 percent, between the fourth quarter of 2016 and the fourth quarter of 2015 based on public quarterly financial statements.
This increase represents the largest year-over-year increase for any quarter by the 44 oil producers analyzed since at least the first quarter of 2012, according to the U.S. Energy Information Administration (EIA).
Higher oil prices are contributing to an increase in upstream earnings for oil-producing companies, leading some producers to expand their investment budgets.
Lower investment levels over the previous two years likely helped cause a decrease in cash from operations for the companies despite an increase in crude oil prices, according to EIA.
Many producers utilize oil futures and options to hedge their investment in production into the future. The number of short positions, or future sales into these markets, can be used to measure for the amount of future production oil companies have hedged. These short positions consist of futures and option contracts held by producers and merchants. Since the fourth quarter of 2016 when crude oil prices rose above $50 per barrel, oil producers began using short positions more often.
Company announcements and increases in the number of active oil rigs suggest U.S. oil production companies are continuing investment growth in the first quarter of 2017. The U.S. active oil-directed rig count reached 662 on March 31 up from 525 at the end of 2016.
