Large stock buyback plans have been popular among public exploration and production (E&P) companies with strong free cash flow (FCF), but informed industry-watchers offered mixed views on whether they are the best option for companies at this time.

NETL rig

NGI’s Patrick Rau, director of strategy and research, ticked off a list of share repurchase advantages.

Buybacks “are discretionary, they can actually reduce the amount of future dividend payments by lowering outstanding shares and, if the company is undervalued, they can replace investing in the drill bit as a way to boost returns on capital,” he said. “Buybacks aren’t perfect, but they may very well be the most flexible option for producers right now.”

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