By Matt Whittaker / NewsBreak Denver
(Denver, Colo.) Executives at SM Energy bought company shares late last month, a potential signal they think the Denver oil and gas firm's stock will gain value as oil and natural gas prices rise.
If those commodities continue their upward price trajectory, SM Energy stands to benefit as it did in the July-September quarter. At the same time, higher energy prices squeeze Americans, including Coloradans, who likely will pay more for electricity due to rising natural gas prices.
On Dec. 31, SM Energy CEO Herbert Vogel bought 509 shares, chief financial officer Wade Pursell bought 113 and general counsel David Copeland acquired 380 at $21.68, according to company filings this week with the Securities and Exchange Commission. In November, they, along with director William Sullivan had donated thousands of shares to charity, a spokeswoman said.
The December purchases were part of the company's employee stock purchase plan that all employees are eligible to participate in, the spokeswoman said. The plan is subject to Internal Revenue Service limitations, she said.
Oil and gas prices increase
The insider purchases come as SM Energy's stock has climbed amid oil and gas prices that have increased as the global economic recovery from the pandemic generates more demand to power businesses and homes. At the same time, supply hasn’t recovered, partly because there is less oil drilling than before the pandemic.
Over the past year, the Denver company's shares have climbed from less than $10 to more than $30.
SM Energy produced the equivalent of more than 14 million barrels of oil in the third quarter, a year-on-year jump of 23 percent while the average price the company realized on that production surged 118 percent.
The flip side is that if oil and gas companies do well because of rising prices for their commodities, consumers see higher energy prices to power their vehicles and heat or cool their homes.
Consumer gasoline prices rose nearly 50% in 2021 while electricity, often produced from natural gas, is up more than 6% and utility natural gas service is up more than 24%, according to the latest U.S. Labor Department consumer price index released this month.
A signal for potentially stronger stock price
Investing experts say insider stock purchases tend to bode well for a company's shares.
Company executives usually have a deeper understanding of a company and its market than average investors, said Ronald Max, a real estate investment advisor with Real Estate Bees.
"Insider buying is definitely a positive sign for the company's future prospects," said Robert Johnson, finance professor at Creighton University. "Insiders sell for many reasons but typically insiders only buy when they believe that a stock is undervalued and will rise in the future."