Oil prices are high, oil majors have made money, but the money is used to buy back

Record natural gas prices and oil trading at seven-year highs above $90 a barrel have provided Western oil and gas giants with lucrative profits that are willing to buy back shares at near-record levels this year as a way to boost EPS and boost investor returns
.

Bernstein Research, an independent asset research firm, estimates that seven major oil majors, including ExxonMobil, Chevron, Shell and BP, plan to buy back $38 billion in shares
this year.
Analysts at RBC Capital Markets expect buybacks to reach $41 billion, the highest level since the $46 billion buyback record in 2008 and nearly double the $21 billion buyback in 2014 (the last time oil prices exceeded $100 a barrel).

It is worth mentioning that many investment institutions, including Goldman Sachs, expect that the price of crude oil is expected to rise further, even more than $100 / barrel, which gives oil and gas giants better profit expectations
.

In this regard, Biraj Borkhataria, an analyst at RBC Capital Markets, said:

"The industry is at its best in a long time
.
Now the question is the duration
of the cycle.
”

At the same time, he also pointed out that the poor performance of oil and gas stocks during the pandemic has led the management team to believe that stocks are undervalued and that it is a good idea to buy back when the cost of buyback is low
.

Nick Stansbury, head of climate solutions at Legal and General Investment Management, the UK's largest asset manager, also said companies had to "strike a balance"
given the uncertainty of future energy demand.
Therefore, a buyback is a good scenario:

"Buying back shares at a modest level could be a very attractive proposition
for investors.
"

It is worth mentioning that RBC analyst Borkhataria also added that in addition to stock purchases, the seven oil giants may pay dividends of about $50 billion to shareholders this year
.
At the same time, if oil prices climb further, the total return for supergiant shareholders could be higher
.

Why don't oil and gas giants consider a significant expansion of production and instead invest a lot of money in dividends and buybacks?

Wall Street News previously mentioned that under the pressure of Wall Street, the previous difficult survival experience, ESG investment and other factors, shale oil companies are less willing to expand production this year
.
Instead of increasing production, these shale companies are more willing to use excess cash flow to pay off debt, buybacks and dividends
this year.

After 2015, many manufacturers fell into the cycle of "oil price rebound - production increase - supply increase - oil price decline - forced production reduction", and then the negative oil price in 2020 caused dozens of companies to go bankrupt, which seriously hit the confidence of the shale oil industry to increase production
.