When oil prices plunged below zero, these CEOs bought up stocks in their own companies
After a year, we finally know who went on a buying spree
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CALGARY – As investors search for the “Holy Grail” of management teams buying their own stock by the barrel, many have questions for oil chief executives that didn’t go on a buying spree when crude prices crashed in 2020.
Last year, stock valuations in the Canadian oil and gas industry fell to either multi-decade lows, or all-time lows as the first wave of the COVID-19 pandemic and an oil-price war between Russia and Saudi Arabia began.
As equity values started plunging in March 2020, chief executives in the energy sector continued to promote their companies as good long-term holdings, whose values were not accurately reflected on the Toronto Stock Exchange. Company disclosures filed in recent weeks now reveal which oilpatch CEOs were willing to follow their own advice and aggressively buy up shares in their own companies.
“For sure there was trepidation when we were going through that time,” said Grant Fagerheim, president and CEO of Whitecap Resources Ltd., who was one of the most active buyers of his own stock during the collapse.
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A year ago, as monthly oil delivery contracts rolled over on April 20, 2020, West Texas Intermediate oil prices fell to a previously unthinkable negative value of –US$37 per barrel.
On the day of negative WTI oil prices, Whitecap shares traded for $1.35 each, which is down 75 per cent from the company’s value at the beginning of 2020 before the COVID-19 outbreak.
While investors were selling, Fagerheim was buying. Over the course of 2020, he bought 226,394 Whitecap shares, boosting his holdings in the company by 8 per cent. In fact, disclosures show that in the two weeks from March 1 to March 12, Fagerheim bought 126,000 Whitecap shares.
The company’s share price bottomed a week later at 90 cents per share, and was up $5.67 by end of day on April 19, exactly a year after prices had fallen into negative territory.
“Once I was able to establish from our perspective that we were in a good space, we had a financially sound operational and financial plan, our leverage wasn’t too high, I believed that going forward we could make a difference,” Fagerheim said.
Institutional investors carefully watch for companies whose CEOs, management teams and directors buy their own stock because it shows an alignment with shareholders, said Laura Lau, senior vice-president and chief investment officer with Brompton Group in Toronto.
“If they’re willing to invest, they’re putting their money where their mouth is. They’re out there pitching, ‘my company is cheap, my company is great,’ well then, ‘how come you’re not buying it? You’re trying to convince me to buy it, but you’re not buying it?’” Lau said.
