Shale firms pump up dividends as industry focus on returns grows

By Ernest Scheyder

HOUSTON, March 25 (Reuters) - Nearly a third of the 25 topU.S. shale oil producers have paid or pledged to pay dividendsthis year, according to Reuters review of financial filings, thelargest number since the shale boom took off a decade ago.Oil prices have risen by over a third in the pastyear, giving shale producers more revenue to respond to investorcalls for improved shareholder returns.

Investors in shale have seen thin returns despite boomingproduction, as shale firms have used profits to invest inraising output more rather than returning cash to shareholders.

Seven U.S. independent shale producers, including AnadarkoPetroleum Corp and ConocoPhillips, have boostedquarterly dividends this year, financial disclosures show.That's a change from just two years ago, when eight of the 25largest shale firms cut payouts as oil prices plunged.

"Investors are using a large megaphone as they talk to theindustry about returns, and it's on the minds of a lot of CEOs,"Travis Stice, chief executive of shale producer DiamondbackEnergy Inc, said in an interview.

Diamondback last month announced a 12.5-cent quarterlydividend, becoming the first U.S. shale oil company to start apayout since the oil price downturn began in 2014, according toS&P Global Market Intelligence. Shares of the Midland,Texas-based company, which operates in the Permian Basin, thelargest U.S. oilfield, are up about 11 percent since the move.

"You're going to see more shale producers focus ondividends," said Leigh Goehring of G&R Associates, a NewYork-based energy investment research firm. "Shareholders aredemanding it and a trend is forming."

Since January, 11 shale producers have disclosed plans tospend $3.5 billion on stock buybacks.

Oil producers this week will meet investors at an industryconference in New Orleans, a gathering that energy firms oftenuse to outline annual production goals and to shape investorexpectations for first-quarter results.

Calls are likely for more companies to begin offeringpayouts through dividends or share repurchases. The outlook forcontinued production gains and the impact of rising servicecosts also will be on investors' agenda.

"There does seem to be increasing evidence of financialprudence in the industry," said Andy McConn of oil consultancyWood Mackenzie.

Twelve of the 25 largest shale firms do not have quarterlypayouts, choosing instead to reinvest cash in drilling and otherprojects. Parsley Energy Inc and Continental ResourcesInc are among the largest of that group, focusing ondriving growth in the largest- and second-largest U.S. shalefields, respectively.

That may change as more of their peers focus on payouts.

"Investors are looking for improving results, better returnsand operational performance," said Maynard Holt, chief executiveof energy investment bank Tudor, Pickering, Holt & Co.(Reporting by Ernest Scheyder; Editing by Gary McWilliams,Simon Webb and Sandra Maler)

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