Page 10: of Offshore Engineer Magazine (Jul/Aug 2014)

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Editor’s Column

Colloquy

Nina Rach

Energy and capital: Operators reinvest cash usiness is good in the oil? eld, and program is to offset dilution created by an additional $500 million in share buy-

B as increased production and steady the issuance of shares for the company’s backs, fully funded by divestment of the commodity prices contribute an in? ux of Scrip Dividend Program. At this time, it Marathon’s 10% ownership in offshore cash, operators are reinvesting in them- is less economic for the company to pur- Angola Block 31 to Sonangal Sinopec selves, expanding their share buyback chase ‘A’ ordinary shares under the share International Ltd., a subsidiary of China’s programs. Management usually says that buyback program due to Dutch dividend Sinopec, for about $1.5 billion.

the share repurchases create long-term withholding tax rules.” Eni SpA has been buying back shares, value for shareholders, reducing the total BP has been re-aquiring its shares for and although as of late April, it held outstanding shares of the company. several years. After announcing it would nearly 22 million shares, this represents

Buybacks are also a mechanism used sell its 50% stake in Russian TNK-BP a only 0.60% of the share capital.

when stock prices are perceived to year ago, it also announced an $8 billion

Middle East undervalue company assets. share buyback program.

Burgeoning cash balances from stable In April, BP Chief Executive Bob Dragon Oil, the cash-rich explorer production revenues and company Dudley said more share buybacks were that is controlled by Dubai’s Emirates streamlining through asset divestment planned, as the company also increases National Oil Co. has production assets support most share repurchase programs. its quarterly dividend payments. off Turkmenistan. In September 2011, it

Buyback programs usually result in a began buying back shares. Then in June rise in share price, one way of returning 2012, it launched a $200 million share wealth to shareholders, in addition to pay- buyback program to repurchase up to 5% ing regular dividends. The programs also of its outstanding shares.

garner favorable responses from ? nancial

Australia analysts and positive market buzz.

Australia’s Murphy Oil Corp. has followed

For smaller companies, however, a steady share buyback strategy, complet- shareholders may question whether the ing a $1 billion program last year, and an company is retaining enough free cash to additional $250 million in 1Q 2014.

grow their operations.

Murphy’s board of directors approved

Majors a new share repurchase program in May

According to The Energy and Capital that allows the company to repurchase newsletter from Angel Publishing: up to $125 million in shares of common “There’s a steady liquidation of the world stock. No details announced, but the com- oil industry... Exxon is buying back about pany will complete by the end of this year.

US$30 billion of its shares each year. If In March, Chevron Corp. said its Woodside Petroleum Ltd. recently that continues, Exxon will have repur- dividends and share repurchase pro- announced it was buying 9.5% of chased all its stock by about 2024.” gram would be internally funded by its outstanding stock from Shell for

The same article goes on to say 2015-2016. The company told analysts it US$2.68 billion, based on a share price that the Big 5 (Exxon, Chevron, BP, expected its operating cash ? ow to grow of AU$36.49, a “14% discount to volume

ConocoPhillips and Royal Dutch Shell) from $35 billion in 2013 to above $50 bil- weighted average price up to and includ- are spending more on stock buybacks lion in 2017, driven by 20% production ing 16 June 2014.” Shell sold another than they are on ? nding new oil. growth over the period and improved 9.5% to institutional investors.

Anglo-Dutch Royal Dutch Shell buys cash margins. It plans to monetize about

Service companies back about half a million of its own ‘A’ $10 billion assets from 2014 to 2016 shares daily, although it’s worth noting (20% midstream, 80% upstream). Luxemburg-based Subsea7 SA has been that there are just short of four billion ‘A’ Marathon Oil Corp. is pursuing a buying back shares through 4Q 2013 shares outstanding. two-stage, billion dollar program to buy and 1Q 2014. At the end of 2013, it held

In March, Shell announced a buyback back common shares. The ? rst stage, indirectly about 4% of issued shares, in program for ‘B’ shares in April, say- buying up $500 million of stock, was addition to shares held in an employee ing “the purpose of the share buyback completed last year. The second phase is bene? t trust.

July 2014 | OE oedigital.com 12 012_OE0714_Colloquy.indd 12 6/20/14 10:47 AM