US shale producers eager to please shareholders after years of poor returns stepped up with a series of dividend increases.
Bakken and Oklahoma-focused producer Continental Resources upped its dividend payout by more than a third last week to 15¢/share. The company founded by shale pioneer Harold Hamm also resumed a $1bn share repurchase program that was suspended at the height of last year's Covid-19 outbreak.
Continental was followed by Pioneer Natural Resources, one of the Permian basin's top acreage holders, which this week announced a new variable dividend of $1.51/share to be paid in the third quarter — earlier than the original 2022 date.
The common denominator is a desire to reward long-suffering shareholders with a cash windfall from this year's recovery in oil prices and also demonstrate that the previous growth-at-all-cost strategy will not be repeated.
Permian producer Diamondback Energy said this week it increased its annual dividend by 12.5pc to $1.80/share, at the same time it pared the capital budget for this year and forecast flat output.
"As we look at supply and demand fundamentals, oil supply is still purposely being withheld from the market, and we continue to believe that there's not a call on US shale production growth," said Diamondback chief executive Travis Stice, referring to the Opec+ group's spare capacity.
And Devon Energy, which is active across several US oil and gas plays, also got in on the act, declaring a fixed-plus-variable dividend of 49¢/share, a 44pc increase from its last payout.
Chief Executive Rick Muncrief said the current round of dividend increases by Devon and rivals "will further enhance the investment thesis for our industry, paving the way for higher fund flows as investors rediscover the attractive value proposition of the E&P (exploration and production) space."
After funding the fixed dividend going forward, up to 50pc of excess free cash flow in any given quarter will be allocated to the variable dividend, Devon said.
Even smaller producers have taken up the higher shareholder return message. Magnolia Oil & Gas, which operated in the Eagle Ford shale and Austin Chalk in south Texas, debuted a semi-annual dividend of 8¢/share that will be paid in September.
The one notable exception that did not announce a dividend increase was ConocoPhillips. But the biggest US independent producer said in June it planned to increase its share repurchase program by $1bn, bringing total distributions for the year to about $6bn.
