Popular – U.S. E&Ps Continue to Maintain Investor Support Despite Commodity Price Plunge

It hasn’t been easy, but the leading U.S. oil and gas producers have maintained investor support — even as crude prices dropped by 25% over the past three years. Much like the characters in “Wicked,” whose grip on the audience’s loyalty endures, magic or no magic, these companies have cast their own spell by throttling back capital spending, prioritizing shareholder returns and keeping new debt at bay. In today’s RBN blog, we analyze the cash-allocation strategies of U.S. E&Ps in Q3 2025.

It was no surprise that surging post-pandemic commodity prices drove a massive recovery in E&P share prices through the mid-2022 peak. Crude oil prices subsequently retreated, however, tumbling 25% from $84.26/bbl at the end of Q3 2022 to $63.96/bbl on September 30, the end of Q3 2025. What is remarkable is that the S&P E&P Index rose by 6% over the same period. The factors that have made oil and gas producer shares so “popular” include their decision a few years back to dramatically shift cash allocation from capital investment to dividends and share repurchases. As we explained in Mission: Impossible, the average E&P dividend yield of the 39 companies we monitor soared from 1% in 2019 to 3.28% in 2022, 3.98% in 2023 and 3.79% in 2024. Despite lower commodity realizations, the average yield remained elevated at 3.65% through the first nine months of 2025, more than three times the average 1.18% yield of the S&P 500 in September.

Sustaining dividends while revenues decline raises concerns that the industry might be tempted to use debt financing for shareholder returns. However, as we recently explained in Zero Sum Game, the average debt-to-capital ratio of the companies we cover dipped to a five-year low of 24.5% in Q2 2025, far below the nearly 40% peak during the pandemic. Our universe of E&Ps actually reduced net debt by $9 billion from Q2 2024 to Q2 2025, despite continued strong acquisition activity. 

The major reason balance sheets have remained solid is that the acquisitions were largely equity-funded. As shown in Figure 1 below, the total shares outstanding for the companies we follow (combined blue and green bar segments and left axis) jumped from 8 billion in 2021 to more than 10 billion in 2024 through substantial equity issuances (green bar segments and left axis). Diluting shareholder equity by increasing the number of outstanding shares normally depresses stock prices, but E&Ps have been able to mitigate that trend by sustaining significant share-repurchase programs (purple line and right axis). ExxonMobil and Chevron, which have pursued the most aggressive buyback programs ($20 billion and $15 billion in 2024, respectively), have dramatically curtailed their programs in favor of dividends as commodity prices have declined. Because share issuances have slowed through the first three quarters of the year, the total shares outstanding for the 39 companies we follow have actually declined.