A majority of large publicly held US shale operators are between a proverbial rock and a hard place.

How to service debt and pay out dividends? That is a question vexing more than one-half of large U.S.

publicly held shale exploration and oil rig flanges gulf coast production (E&P) firms, according to Rystad Energy.

In a recent study analyzing the 33 largest shale operators in the United States, Rystad found that many of the E&Ps spent the second half of 2018 reducing their leverage ratios. Moreover, the Norway-based independent energy research and consulting firm predicts that many of the companies will barely have enough free cash flow to cover this year’s debt service payments.

Then there’s the matter of paying investors.

“Shale E&Ps struggle to please equity investors and reduce leverage ratios simultaneously,” Alisa Lukash, Rystad senior analyst, said in a written statement emailed to Rigzone. “Despite a significant deleverage last year, estimated 2019 free cash flow barely covers operator obligations, putting E&Ps on thin ice as future dividend payments remain in question.”

Rystad observed that interest rates hovering near zero percent since the financial crisis have motivated shale players to repeatedly turn to debt markets to finance their growth. The consultancy’s analysis of the E&P companies’ debt maturity profiles shows that more than one-half – 52 percent, to be exact – of the firms’ debt and interest payments are due within the next seven years. As a result, Rystad predicts that dividend payments will fall by nearly $4 billion – with initial projections of $6.3 billion shrinking to a probable level of approximately $2.3 billion.

“The obvious gap in expected versus likely dividend payments confirms the industry’s inability to deliver sustained investors’ payback while simultaneously deleveraging,” said Lukash.