How Shale Producers Can Win Over Skittish Investors

Flush with cash, U.S. shale producers vary in approach to shareholder returns but one, in particular, appears to be well-suited to the industry’s boom-and-bust life cycle.

(Source: Hart Energy, Shutterstock.com)

[Editor's note: A version of this story appears in the June 2022 issue of Oil and Gas Investor magazine.]

U.S. shale producers are increasingly honoring executive pledges to share their wealth with investors and shareholders, and they may have zeroed in on an approach that’s particularly well-suited to the industry’s boom-and-bust life cycle.

The addition of a variable dividend gives companies the option to increase shareholder returns when cash flows freely, but it doesn’t lock in an expense when the wells run dry.

One of the world’s largest independent producers was an early mover toward high-dollar variable distributions. ConocoPhillips Co.’s CEO Ryan Lance in December announced a $1 billion variable distribution as part of the firm’s commitment to return 30% of cash flow to investors.

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