(Bloomberg) -- First came the production discipline, and now here’s the cash.
Pioneer Natural Resources Co. on Monday became the latest major U.S. shale driller to return more money to investors, accelerating a special dividend by six months as the sector tries to lure back investors.
Pioneer will pay a variable dividend of $1.51 a share during the third quarter, six months ahead of schedule, the Irving, Texas-based company said in a statement on Monday. The windfall is on top of the explorer’s regular payout and represents 75% of second-quarter free cash flow.
“This strategy better aligns Pioneer shares to the oil macro and should appeal more to investors,” Scott Hanold, an analyst at RBC Capital Markets LLC, wrote in a note to clients. “This should provide a competitive investment proposition within energy and to other sectors.”
Continental Resources Inc., the oil producer controlled by billionaire Harold Hamm, resumed share buybacks with a $1 billion program more than a year after suspending them. The Oklahoma City-based producer increased dividends by 36% late last week. Meanwhile, Permian Basin producer Diamondback Energy Inc. raised its annual payout by 12.5% and reduced capital spending. Magnolia Oil & Gas Corp. announced its first-ever dividend.
“The world oil market is still artificially undersupplied and there is not a call on shale production growth today,” Diamondback CEO Travis Stice said in a statement. “Diamondback will maintain capital discipline by holding oil production flat for the foreseeable future.”
Benchmark U.S. oil futures have advanced 44% this year and at that pace is on track for the biggest annual increase since 2016. In returning so much cash to shareholders, shale drillers are showing they will pass on gains from higher crude prices. It’s a step change from the grow-at-all-costs mentality that characterized the sector until back-to-back crude busts and Covid-19 forced explorers to rein in growth and focus on shareholder returns.
Higher gas prices are also benefiting the sector, which has typically regarded the fuel as a costly byproduct of oil. Many producers favored flaring gas rather than spending money on pipelines to take it to market. But high prices have now turned it into a more valuable commodity.
Magnolia said it was directing more it its spending “toward drilling and completing some gassier wells” in the Eagle Ford region of south Texas.
Pioneer jumped 4.2% at 10:07 a.m. in New York, bucking the almost-3% slide in crude futures. Continental rose 1.5%, while Diamondback climbed 2.6% and Magnolia advanced 1.2%. Occidental Petroleum Corp. and Devon Energy Corp. report earnings later Tuesday.
(Updates with stock-price action in final paragraph.)
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