- 2Q20 LTO revenues fell faster than pricing as development activity collapsed and production was shut-in
- For our coverage universe, net income was up on 1Q20, but still negative at -$19.3 billion, with just one company reporting positive net income
- After four consecutive quarters above zero, free cash flow was negative, as the loss of production and weaker pricing outweighed the collapse in capex
- Our 2020 total US LTO annual average growth forecast is unchanged at c. -1 million b/d
- While North Dakota's production nadir was above our expectations, once shut-ins have all returned we expect sharp declines due to the significant cuts in capex
- Both the numbers of drilling rigs and frac spreads are well below the levels necessary to generate production growth after shut-ins have returned
- We find it unlikely that investors will have the appetite to provide the required capital injections to support strong growth in 2021
by Graham Walker // 28 September, 2020
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