Three energy companies that should buy back shares and four that shouldn’t – Barron’s

Oil and gas producers tend to use bad timing in share buybacks, Wells Fargo analyst Nitin Kumar says, investors “should be concerned about management teams of explorers and producers using dairy cows from temporarily elevated commodity prices to buy back stocks that are at multi-year highs,” according to the latest issue of Barron’s†

But buybacks may still work for some companies whose inventories still don’t fully reflect the large rise in oil prices, Kumar says, pointing to Coterra Energy (NYSE:CTRA), CNX sources (NYSE:CNX) and Centennial Resource Development (NASDAQ:CDEV†

The analyst says Coterra should continue to repurchase shares, mainly because the shares do not fully reflect the high price of natural gas, although with the current license it can only buy back ~6% of the float.

CNX also ranks near the top of Kumar’s list, as the stock also doesn’t fully reflect high gas prices yet; its current authorization allows it to buy back up to 30% of its float.

CDEV is also well positioned to repurchase shares and has clearance to repurchase ~20% of its float.

On the other hand, Kumar says Antero Resources (AR), Pioneer Natural Resources (PXD), Devon Energy (DVN) and EQT (EQT) should hold off on buying backs for now as risk-reward for the four looks less favorable at current prices .

Centennial shares rose 8% Friday as Stifel noted improved drilling efficiencies and strong shareholder returns when upgrading to Buy.