US shale producers aren't cashing in on soaring oil prices as skittish investors shy away from new drilling projects

• Oil prices and frackers' free cash flow are both at multi-year highs, often a sign the industry needs to ramp up investment in new projects.
• But compared to pre-pandemic, US oil production is down two million barrels and active oil rigs are sitting at just half previous levels.
• Skittish investors are behind the lower production levels, as they lobby producers to prioritize debt reduction.

Oil is trading above $70 but US shale producers aren't reaping the rewards, as gun-shy investors favor debt reduction over flashy drilling projects, according to a new report from the Wall Street Journal.

Oil prices and frackers' free cash flow are both at multi-year highs, normally a sign that the industry needs to quickly ramp up investment in new projects. But compared to before the pandemic, US oil production is down two million barrels and active oil rigs are sitting at just half previous levels, according to Baker Hughes data cited by the Journal.

Skittish investors - burned before by shale drillers who had aggressively ridden past oil booms - are behind the lower production levels, as they lobby producers to prioritize debt reduction.

Producers are still raising tens of billions in debt this year, but largely to finance past debts. Some are even cutting capital expenditure to pay off debt, with some of the most heavily indebted seeing banks slash their credit lines. At the start of the year, shale firms had nearly $150 billion in accumulated debt, according to Wood Mackenzie.

Scott Sheffield, CEO of Pioneer Natural Resources, told the Journal that many companies are not focusing on dividends amid the debt-reduction push. "There's no reason for them to buy into this sector at this point in time," he said.

Futures in the West Texas Intermediate oil benchmark were trading at $73.93 as of 9:47 a.m. ET.