Following 2017 investor shift, some shale producers respond

By Luke Geiver | February 20, 2018

As exploration and production companies close out fiscal year 2017 and offer guidance for this year, it appears some companies have been listening to investor sentiment calling for a shift in capital allocation. As we wrote here, many investors have called on E&P’s to rethink the way they spend their shale-based dollars. In the past, acreage acquisition and production growth was most highly valued among investors looking to linked to E&Ps, but in the past year, many investors have called on producers to devote more focus—or money—to dividends or share repurchase programs.

Diamondback Energy—a Permian-focused producer—announced this month that the company will initiate a cash dividend increase to $0.50 per common share beginning in Q1. “In a year where investor focus shifted from resource capture to resource execution and capital discipline in the Permian Basin, Diamondback delivered on its promises,” said Travis Stice, CEO. Diamondback is now taking its first step “toward rewarding shareholders for their support,” of the company’s growth in the last five years, Stice added.

WPX Energy, a multi-play producer, will also up its dividend to shareholders. The board of directors approved a quarterly dividend of $0.78 per share to holders of the company’s series A mandatory convertible preferable stock.

Laredo Petroleum and Encana have each issued a share repurchase program. Encana plans to spend $400 million to repurchase up to 35 million common shares over the next year, the company said.

Laredo will spend $200 million on a similar program. The company will repurchase shares on the open market or through privately negotiated transactions. The company recently sold a pipeline-related asset. “Our balance sheet strength after the divestment,” said Randy Foutch, chairman and CEO, “offers several avenues to accelerate value recognition for our current shareholders. We believe this repurchase program is the most compelling and accretive avenue at this time.”