You are here: Home » Reuters » News
Business Standard

Oil majors give in to investors with share buyback spree


By Nivedita Bhattacharjee

(Reuters) - After almost three barren years for investors who have poured millions into the U.S. sector, producers are finally opening the floodgates to a wave of share buybacks that will return money to shareholders this year.

U.S. production topped 10 million barrels per day earlier this year, approaching a record set in 1970, but until recently many investors in the shale revolution were still waiting for their payday.

Since the beginning of year, 11 companies have promised buybacks, with six alone in the past three weeks including Devon Energy, and Inc. In all, companies have committed to buy back about $3.6 billion worth of shares since February.

The United States' second largest also weighed in last week, hinting it would start buying back shares if it produced stronger cash flow in 2018.

The payouts come courtesy of a combination of higher and more prices and pressure from investors.

U.S. Intermediate (WTI) has more than doubled, crossing $60 per barrel. Back in Feb. 11, 2016, fell to $26.05, its lowest in 13 years.

"There was a time when the consensus was that we'd be stuck at around $45 a barrel for oil, and obviously conditions have improved since then," said Derek Rollingson, a at

"There is a disconnect between commodity prices and returns from exploration and production companies."

Before started to take a downturn in 2014, companies had spent billions of dollars in exploration and new projects. When fell below $30, producers in sought to raise cash by selling more shares, pushing down stock prices.

The Index is down about 32 percent since mid-2014, when prices topped $100 a barrel.

Wall Street finally put its foot down last year, with investors demanding a shift to dividends and share buybacks. was punished for ignoring the demands and focusing on its expansion plans.

"I've seen companies going to to get yelled at. That's how angry shareholders are," David Beard, analyst at research firm Coker and Palmer, said.

Reacting to market sentiments, Hess and Devon said they would either buy back $1 billion worth of shares, or add that much to existing programs. added a further $500 million to its $2.5 billion-share buyback program, while Noble authorized a repurchase of $750 million.

For Hess, the announcement was also a way to avoid a skirmish with activist hedge fund ahead of nominations for its board.

Elliott, which owns more than 6 percent of Hess, had criticized the company for "continuing underperformance," but supported the buy back program earlier this month.

"We believe that repurchasing our shares represents a highly compelling return opportunity for our shareholders," said Hess

U.S. shale producers have started believing they can drill more profitably as crude prices hold steady at around $60 a barrel. Propping up share prices also makes sense if they do want to raise more funds to invest over the next year.

As long as holds to current prices, companies can afford to keep focusing on shareholder returns, analysts said.

"I think we're likely at the beginning of a theme ... there is a lot of room to improve in terms of equity," ICON Advisers' Rollingson said.

(Additional reporting by Anirban Paul; Editing by Patrick Graham, Bernard Orr)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, March 14 2018. 19:44 IST