America’s largest oil and gas producer is maintaining supplies, defying the Biden administration’s calls to raise production even as high fuel prices pushed by the Russian war in Ukraine yield bumper profits.
summit shale oil and gas Producers including ConocoPhillips, Pioneer Natural Resources and Devon Energy reported a sharp increase in second-quarter earnings this month as crude oil and natural gas prices rose to fill industry coffers.
But executives say they are still under pressure from Wall Street to return windfall gains to investors through dividends and share buybacks rather than spending heavily to increase production.
“Unless we have shareholders come in and say, ‘Look, we sure are — we don’t like these big dividends. We don’t like your share buyback program.’ Growth Model “Until we see that, I don’t see any reason to change our strategy.”
Other shale executives echoed that sentiment in the latest sign that oil companies and their shareholders remain unaffected by politicians’ calls for more oil and gas supplies after Russian invasion of Ukraine It led to higher fuel prices. Energy prices have pushed inflation rates across the United States and Europe to levels not seen in 40 years.
President Joe Biden and other Western politicians have attacked the oil companies’ decision to shift profits to shareholders rather than invest in new production that would help tame prices.
Over the past decade, the US shale oil industry has been notorious for its free-spending that has driven up production but caused huge losses for shareholders and plunged companies into debt.
The approach now taken has slowed the growth of the country’s oil supply compared to recent years when commodity prices rose. The United States produces about 12.1 million barrels per day of crude oil, according to the Energy Information Administration. That’s about 800,000 b/d more than last year, but still shy of pre-coronavirus pandemic heights.
The growth in production this year was mainly driven by Special operators It is not subject to the same kind of shareholder pressure to limit investment.
Occidental Petroleum says it remains focused on paying off more of the debt it took on to buy Anadarko Petroleum in 2019 and raise its dividend. For now, it sees pumping money into its stock as a better bet than expanding production.
“We don’t feel the need to ramp up production,” said CEO Vicki Hollub. “We feel that one of the best values at the moment is investing in our own stock.” Billionaire investor Warren Buffett’s Berkshire Hathaway has built a roughly 20 percent stake in Occidental, helping its stock price more than double over the past year.
This year saw a reversal in the fortunes of the shale oil industry after heavy losses during the pandemic, although fears of a recession once again cast a shadow over its prospects.
The Standard & Poor’s ETF is down about 26 per cent from its recent highs in early June, but has remained up 25 per cent this year, putting it to the top in a bleak year for the broader market.
However, many oil executives claim that the supply disruption caused by the Russian invasion of Ukraine will put a floor on crude oil prices even as economic growth slows.
“The slightly different thing this time around is that the world today still looks like chronically short physical barrels with not a lot of spare capacity to fill that gap,” said Travis Stace, CEO of Diamondback Energy. “The overall situation looks very positive for energy prices over the next couple of years, even despite what I know will be the effect of a recession.”