Oil prices have risen considerably this year. West Texas Intermediate, the main U.S. oil price benchmark, traded in the mid-80s and mid-60s. While that’s a broad range, it’s a lucrative band for most producers.
Many oil companies generate much more money than they need. That allows them to return an increasing amount of money to their shareholders. Here are some oil supplies sending barrels of cash to their investors.
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ConocoPhillips (NYSE: COP) is a money making machine. The oil company generated more than $4.7 billion in cash flow from its operations in the third quarter alone, more than covering the $2.9 billion in capital needed to maintain and grow its business. This allowed the company to return $2.1 billion in cash to its shareholders through buybacks and dividends during the period.
The oil giant is on track to return $9 billion in cash this year. It could sway investors even more next year. It has a cash-rich balance sheet, with $7.1 billion in cash and short-term investments and another $1 billion in long-term investments. Furthermore, the company is on track to complete the highly profitable acquisition of Marathon oil this year. The company now expects the deal to significantly exceed the annual cost savings of more than $500 million it initially expected.
ConocoPhillips has already increased its dividend by 34% this year. It plans to deliver dividend growth in the top 25% of companies in the S&P500 in the future. In addition, it plans to increase its share buyback rate next year from the current annual pace of about $5 billion to $7 billion and to buy back more than $20 billion of shares in the first three years after the Marathon deal closes buy. The combination of income growth and buybacks could give ConocoPhillips the fuel to produce strong overall will return in the coming years.
Devon Energy (NYSE: DVN) also generates a lot of money, much of which flows back to the shareholders. The company generated $1.7 billion by operating cash flow in the third quarter and $786 million in free cash flow after capital expenditures. Devon returned $431 million to investors through dividends and share buybacks.
The company has “relied more heavily on our stock repurchase program,” CEO Rick Muncrief said third quarter calland choose not to pay variable dividends. That’s because “we continue to believe that reinvesting in our business at current prices is the right thing to do for shareholders.” Devon trades at a free cash flow yield of 9% at an oil price of $70, which compares to a low single-digit return for the broader market.
