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Quick calculation suggests a sp of approximately £7 to keep 4.4% yield
That’s possibly only 3 years away
Just carried out some quick calculations so hope they are correct.
Current div policy of 4% increase per year take roughly 8 years to get back to something similar to the 2020 div( before the cut).
However if we can continue to squeeze out 10% rises we pass that figure in 3 years,
To keep the current 4.4% yield I’m guessing the sp will be a lot higher
My take on it is that once a dividend has been paid, "Elvis has effectively left the building," probably singing "will you miss me when I am gone!" Certainly the capital & opportunity cost of it has gone. Yield is important though & has to be kept competitive with peers, and compensate to compensate for the oily, distasteful, anti-social risks of holding say Shell or BP shares - "Dirty Business" by Peter Pringle on the dynamics of the similarly vilified tobacco industry is good on this.
If a company buys back shares, when the shares are clearly undervalued (as MOY says), this is a sensible use of capital, if a better safe return cannot be identified elsewhere. Cancelled in Treasury, the buy-backs save the company on payment of a dividend, not just that year, or for the next quarter century, but in perpetuity- quite a saving if done at scale!
The reality is that once the buy-back takes place, less shares own more of the company & this should support or increase the share price! Buy-backs also tidy up & streamline the capital ratios of the company, say if it is gearing up for a takeover. They increase the EPS & ROCE ratios etc, which the financial world tends to applaud!
If you hold the view that Oil & Gas markets will decline over time - not necessarily tomorrow morning, but over say the next decade or 25-years. I see them as helping to mitigate/manage that inevitable incremental decline.
Excellent rational posts on buybacks.
Just to add some numbers, BP announced in February an additional buybacks programme through to year end '25 of ' at least ' $14 billion, in addition to buying back bonds and increasing the dividend 4%pa. This also a minimum - last year dividend was increased 10%. Will capital expenditure of $16 billion ( $14 - $18 guidance) all based on $70 per barrel ( raised from $ 60 if I recall correctly)
Now oil may pull back from time to time - I expect we are seeing this presently which may determine the share price in the short term, great Q1 results or not, but I expect oil will go higher into peak season and stay in the top range of $75 - $95 for years to come.
For those who can hold for a few years or so. This is a fantastic opportunity.
Mark
My view on this is mixed.
Although I agree that Buy Backs in the long term save the company money. The dividend is equally important and the yield is what attracts me along with the income stream on a quarterly basis.
Not really bothered about the SP, could be £4, £5 or £6 . I am happier to buy at £4 and yes you can make money selling high but as many know easier said than done.
My take is simple
If you think the buybacks are taking place at a sp below what you believe the sp should be then they are a bargain.
I do however have some concerns at buybacks over £5 as historically this has proved not to be a good use of funds.
However since I consider sp should be higher than £5 ( based on earnings historically).
I must consider that I still support buybacks at this sp.
I'm with MarkGo on this.
The benefits of the buybacks are mathematical, not mythical and they have not been minor in the case of BP
The most important point is they have taken place whilst the company was extremely undervalued to now undervalued.
Think a bunch of wee shareholders would opt for the discretionary spare cash going on dividend enhancements - rather than the mythical benefits which minor buybacks are said to give.
Think about it:
The knowledge of a higher dividend strategy boing adopted by BP would make the shares more attractive in the market and a positive effect on the SP.
Buybacks currently save around £1 Billion per annum in dividend payments and that figured is growing each and every year. The alternative view of bigger dividends now is a short term view and not one held by me or the large institutional share holders or else it would happen.
Dividends are money leaving the company for good. Buybacks are not only good for the company, they are good for shareholders with saved dividend payouts self funding future dividend increases and to increase the value , undervalued company.
Rather than increased dividends today, I am happy to play the long game.
DOE cites rising oil prices as the reason for canceling the solicitations for oil deliveries to the Bayou Choctaw SPR site.
Biden administration's decision comes amidst concerns over market conditions and global production cuts impacting oil prices.
The cancellation raises questions about the U.S. energy strategy and the future of the Strategic Petroleum Reserve's replenishment efforts.
Biden
Despite indicating they would refill the Strategic Petroleum Reserve (SPR) by the end of this year, the Department of Energy has now canceled solicitations offered last month.
Citing rising oil prices, the DOE said, “We will not award the current solicitations for the Bayou Choctaw SPR site and will solicit available capacity as market conditions allow.” Three million barrels of oil had been slated for delivery to the Bayou Choctaw SPR site in August and September.
The SPR is the world’s largest supply of emergency crude oil. It was established primarily to reduce the impact of disruptions in supplies of petroleum products and to carry out obligations of the United States under the international energy program.
The SPR is maintained by the U.S. DOE and its oil stocks are stored in huge underground salt caverns at four sites along the coastline of the Gulf of Mexico. The size of the SPR (authorized storage capacity of 714 million barrels) makes it a significant deterrent to oil import cutoffs and a key tool in foreign policy.
Following Russia’s invasion of Ukraine, the Biden Administration made the largest withdrawal in SPR history to curb the oil price spikes that happened in the wake of the invasion. The DOE has consistently promised to refill the SPR as market conditions allow.
One of the 2024 energy predictions I made in January had been “The Biden Administration won’t replace more than 10% of the oil removed from the SPR since Biden was inaugurated.”
The reasoning behind the prediction was that in election years, presidents have tended to withdraw from the SPR to prevent rising oil prices leading up to the election.
My prediction concluded with “By the time the summer driving season and the change to summer gasoline blends arrives in May, I think the SPR purchases will be suspended.”
The DOE added, “As always, we monitor market dynamics to remain nimble and innovative in our successful replenishment approach to protect this critical national security asset.” However, with production cuts in Saudi Arabia and Russia starting to impact the market, it is unlikely that there will be significant oil price relief ahead of the election. Thus, we will likely go into the election with the SPR at the current significantly depleted level.
BP shares as part of the buyback are cancelled, not held in treasury
Buybacks never, never make a measurable difference to the SP.
The shares are usually held in treasury …. to be later given out as additional bonuses to the BoD as rewards to supplement their fabulous salaries.
This is one of the main purpose of the remunerations committee.
The giveaway is that the buybacks continue even when the SP is peaking (like what it is doing now) !…. Bonuses time on the horizon soon then ? ;)
May 3 (Reuters) - A BP-Eni joint venture and Rhino Resources Namibia have signed an agreement for a 42.5% interest in a block in the country's offshore Orange Basin, the companies said on Friday.
The agreement is Azule Energy's first investment in Namibia. Azule, formed in 2022, is a JV between Eni (ENI.MI), and BP (BP.L), for their Angolan assets.
Several oil giants including TotalEnergies (TTEF.PA), and Shell (SHEL.L), have invested in Namibia, which plans to open up a major new frontier basin with recent offshore finds ranking among the largest this century
In April, Portugal's Galp Energia (GALP.LS), said it had found at least 10 billion barrels of oil equivalent in its field, in the largely unexplored Orange Basin.
The agreement with Rhino will give Azule the right to drill two exploration wells in Block 2914A, one of which is expected to begin in 2024 and an option to operate petroleum exploration licence PEL85 on completion of the deal.
I see there were more buy backs again today. BP have purchased millions of shares for cancelation, but why is it not having any positive effect on the share price??? Maybe it has had an effect, if so, just imagine how low the shares would be if they were not buying them back!!
At the moment I am holding, but it looks as if oils are on a downward path for several months......I hope not back to £4.50
With regard to next weeks results, the price of the shares usually go down when they are announced.......especially in a tired 'toppy'market, due for a fall. Trouble is, is cash a better prospect? Where does one put cash for a return and little risk? At least we get a dividend, I suppose.
Relax till Tuesday.
Then let’s hope for a really WOW set of results.
Not expecting a wonder set of results .
But there’s not much fun in hoping for an average set of results
I agree, Bob was a class act, just amazed that the BOD and the venerable head of Human Remains ignored Looney's philandering for so long. We all knew.
Soutanglie,
Bob Dudley did such a fine job over 10 years,was actuality disappointed when he got the nod after Hayward fell on his sword but I soon changed my mind.
Bernard did us no favours. Unlike himself and those he gave plum jobs . . .
You say CONOC (COP)could launch a bid for BP. There smaller than BP,Unquote
60 seconds research reveals BP market cap in dollars as $108.2B and Conoco at $143.16B.
COP is significantly larger and certainly much better run.
Either COP has come on leaps and bounds with seriously good acquisitions and management or BP has allowed itself to slip off the big league table through dire management or is it both.
Your welcome Clued.
Flawed or otherwise, the EIA data - with its accuracy issues - remains the ' best ' public information available to private Investors and small to medium institutions who do not have capabilites or resources to analyse all the feed in data. Larger institutionally investors with have their own independent reserch departments and analysts.
The reason the market reacts to this data , that is pre-released prior to publication to a financial cabal, is for financial gain. The data is a utilised as a critical component of the paper ( financial) oil traders strategy. The data and numbers in this EIA releases may not be right but there is still $$$$$$ to be made by reacting to them.
Have a grand day.
Mark
Thanks MarkGo. Surely the Institutional Investors and Analysts, etc... would pay little attention to the EIA's data if it is that inaccurate, that's the issue I have.
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