The oil and natural gas industry is very capital intensive
and devotes the largest share of its earnings to add
new property, plant and equipment to its upstream and
When companies repurchase stock, they are supporting
the equity value of the company. This in turn helps the
owners of the companies – retirees, future retirees and
millions of Americans who have invested their hard earned
savings on the expectation of a reasonable
return on their investment.
It is the responsibility of company officials to build
value for shareholders; one way to do this is through
stock repurchases. Earnings are also used for paying
dividends which additionally benefit shareholders.
While the share of stock repurchases in the oil and gas
industry has increased in recent years, it has averaged
nearly half of that for the S&P industrial group. For the
last 15 years, the oil and gas industry spent an average
of 28 percent of net income on stock repurchases while
the rate for the S&P industrials was 51 percent.