Another Oil Giant Sees Value in an Unexpected Place

Oil production is an incredibly capital-intense business. Producers need to pour billions of dollars into new wells just to maintain their current output rate, with billions more needed to increase production. In fact, the industry has a history of reinvesting every dollar of cash flow, and then some, into new oil projects. That said, this pursuit of growth at all costs hasn't paid off in recent years, actually contributing to crude's crash and currently keeping a lid on prices.

As a result, more oil companies are choosing to divert a portion of their excess cash to what they see as a more valuable pursuit: Share buybacks. The latest to hop on the buyback bandwagon is Anadarko Petroleum (NYSE: APC), which plans to spend up to $2.5 billion on repurchases by the end of next year because it believes it can create more value for investors with those repurchases than by investing that capital into more oil wells.

Image source: Getty Images.

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Source: Fool.com