Oil majors give in to investors with share buyback spree

By Nivedita Bhattacharjee

March 14 (Reuters) - After almost three barren years forinvestors who have poured millions into the U.S. oil sector,producers are finally opening the floodgates to a wave of sharebuybacks that will return money to shareholders this year.

U.S. oil production topped 10 million barrels per dayearlier this year, approaching a record set in 1970, but untilrecently many investors in the shale oil revolution were stillwaiting for their payday. https://in.reuters.com/article/us-usa-oil-record-strategy-analysis/u-s-shale-investors-still-waiting-on-payoff-from-oil-boom-idINKCN1G70IE

Since the beginning of year, 11 companies have promisedbuybacks, with six alone in the past three weeks including DevonEnergy, Hess Corp and Noble Energy Inc.In all, companies have committed to buy back about $3.6 billionworth of shares since February.

The United States' second largest producer Chevron Corpalso weighed in last week, hinting it would start buyingback shares if it produced stronger cash flow in 2018.

The payouts come courtesy of a combination of higher andmore stable oil prices and pressure from investors.

U.S. West Texas Intermediate (WTI) has more thandoubled, crossing $60 per barrel. Back in Feb. 11, 2016, oilfell to $26.05, its lowest in 13 years.

"There was a time when the consensus was that we'd be stuckat around $45 a barrel for oil, and obviously conditions haveimproved since then," said Derek Rollingson, a portfolio managerat ICON Advisers.

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

Before oil started to take a downturn in 2014, energycompanies had spent billions of dollars in exploration and newprojects. When oil fell below $30, producers in North Americasought to raise cash by selling more shares, pushing down stockprices.

The S&P 500 Energy Index is down about 32 percentsince mid-2014, when oil prices topped $100 a barrel.

Wall Street finally put its foot down last year https://in.reuters.com/article/usa-oil-record-strategy/rpt-analysis-u-s-shale-investors-still-waiting-on-payoff-from-oil-boom-idINL2N1QC16Y,with investors demanding a shift to dividends and sharebuybacks. Exxon Mobil was punished for ignoring thedemands and focusing on its expansion plans.

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

Reacting to market sentiments, Hess and Devon said theywould either buy back $1 billion worth of shares, or add thatmuch to existing programs. Anadarko added a further $500 millionto its $2.5 billion-share buyback program, while Noble Energyauthorized a repurchase of $750 million.

For Hess, the announcement was also a way to avoid askirmish with activist hedge fund Elliott Management ahead ofnominations for its board.

Elliott, which owns more than 6 percent of Hess, hadcriticized the company for "continuing underperformance," butsupported the buy back program earlier this month.

"We believe that repurchasing our shares represents a highlycompelling return opportunity for our shareholders," said HessEnergy Chief Executive Officer John Hess.

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

As long as oil 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 ... thereis a lot of room to improve in terms of equity," ICON Advisers'Rollingson said.

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

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