Energy firms pay record prices to buy own shares as oil booms

Energy stocks are on a roll as soaring oil prices push them to record highs. So what are the companies doing with the windfalls? Buying back their shares.

Energy stocks are on a roll as soaring oil prices push them to record highs. So what are the companies doing with the windfalls? Buying back their shares. 

At least 21 large U.S. and Canadian energy companies have bought back their own stock in the last quarter, with the move continuing this year in the buildup to Russia’s invasion of Ukraine: Halliburton Co. signaled late in January it could use excess free cash flow to buyback shares and more recently, Occidental Petroleum Corp. launched a US$3 billion buyback program.

To Wall Street strategists schooled in the logic of “buy low, sell high” this makes little sense particularly at a time when oil revenues are surging and the stocks hit yearly, multi-year or -- in some cases -- all-time highs. Even some companies are scratching their heads.

“People buy back their stock, historically, at the top in our industry,” Pioneer Natural Resources Co. CEO Scott Sheffield said at the CERAWeek by S&P Global conference in Houston. “Not one U.S. company bought their stock in 2020, which is when we should have been buying our stock.”

Laura Lau, senior vice-president and chief investment officer at Toronto-based investment manager Brompton Group believes that raising dividends would be a more efficient way to get capital to shareholders. 

“Personally, I like money in my hands,” Lau said in an interview.