Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
Exploration
"I’m surprised no-one comments on the ‘methane from rubbish dump’ project."
A comment on the rubbish dump project !
Recently, BP’s renewable natural gas (RNG) plant in Medora, Indiana, went into operation. The plant is part of Archaea Energy, the largest RNG producer in the United States, which BP acquired in December last year. It is reported that this RNG plant can process 3,200 cubic feet of biogas into RNG per minute. According to BP, the plant will be able to heat approximately 13,000 homes per year once it is put into operation.
Ahoy Bob Dudley, where are you ??? Please come back and kick ass on this BOD
Excellent points meoryou
Really interesting views since results day with opinion against the current board and the transition strategy and calls for a renewed focus on the hydrocarbon business but here are some numbers to consider
Last quarter for every £20, BP returned £9 to shareholders through dividends and buybacks. Invested £11 in the hydrocarbon ( O&G) business and invested only £1 on low carbon investments.
This gives a little perspective to the real priorities of the board.
Just some thinking aloud.
If Shell were even considered buying up BP, would they increase their buybacks as they have or would they secretly buy up some BP before their interest came out.
My initial thought was the increase in buybacks probably means they are not interested.
But that’s more how take overs used to happen.
Just maybe the plan could be increase the Shell sp by buybacks and thus increase the difference in the share prices.
Then when a bid comes the same conversation of BP shares to Shell would look so much better to holders of BP.
Just a thought, and in no way saying it’s what’s happening, or likely to happen
DrPatience
At the time in 2020 BP were trying to put a finger in as many pies as possible.
Now is the time for the following
1) to understand what we are good at and can make money from.
2) to pick our new leader ,who will decide the companies future direction
3) to get out of what does not work.
I personally don’t think it’s as simple as some say to get out of Net Zero,as some thing do work but only in some areas.
Eg US Offshore wind no one is defending in its current form.
It’s kind of funny that people are so down on BP ( and yes I understand based on sp that is a valid position), but expect someone to buy us up.
So there is no doubt the value is there, just currently not being recognised in sp.
There is a lot good about BP,and many of their plans make sense.
But how do we unlock the hidden value
Good morning all.
From The Times
BP adrift after loss of skipper
Wednesday November 01 2023, 12.01am,
America’s energy majors have placed their bets. The deals they have sealed show they believe demand for oil will be healthy far into the future. Shell’s boss has signalled a tilt back towards hydrocarbons. BP is in limbo.
Without a permanent boss, uncertainty hangs over whether the FTSE 100 group will stick with the pivot towards renewables started by Bernard Looney, the chief executive who abruptly resigned in September, or row back in the hope of reviving an underperforming share price.
An enterprise value of just 3.4 times forecast earnings before interest, taxes and other deductions puts BP at a discount to big US peers as well as European counterparts TotalEnergies and Shell.
Missing third-quarter profit expectations has added more pressure. Underlying replacement cost profit of $3.3 billion was below the $4 billion consensus figure, a disappointment largely stemming from its gas trading division. It comes after several quarters of heightened volatility that had subsided recently.
Last month saw two megadeals in the industry, with Chevron agreeing its biggest ever acquisition in the US independent oil and gas company Hess, and ExxonMobil’s $60 billion bid for the Texas-based exploration group Pioneer Natural Resources. Murray Auchincloss, BP acting chief executive, said that no major M&A within the US energy market is on the cards for BP to ramp up capacity.
He points to projects that put 36 billion barrels of oil equivalent in the hopper, 18 billion of which are economic right now. That is enough to see BP’s underlying production grow to 2025 and adjusted earnings from oil and gas to hit between $30 and $32 billion, and stay at that level to the end of the decade.
A plan to distribute 60 per cent of surplus cash back to shareholders saw another $1.5 billion share buyback declared alongside third quarter results. That was alongside a 7.27 cent-a-share dividend.
• BP shares lose their spark after ‘weak’ performance by gas traders
Current capital return plans look sustainable, even if commodity prices falter. The dividend can be held, based on oil at $40 a barrel, and raised at an annual 4 per cent with oil at $60. Likewise, share buybacks of $4 billion are on the table this year while Brent Crude is around $60 a barrel, below the average realised price of $86.75 in the third quarter.
Surplus cash amounted to $3.1 billion in the third quarter and just over $5 billion so far this year. Analysts think BP will be able to sustain free cashflow of between $9 billion and $13 billion out to 2027, including $13.8 billion this year. The rest of the extra cash will go towards paying down debt, $22.3 billion at the end of September. That is already down by around a third over the last decade. The group is reaching for an improved “A” investment grade credit rating, which analysts at RBC Capital reckon it
Continued from The Times
BP adrift after loss of skipper
...That is likely to prompt investors to start thinking about an increase in the cash payout ratio next year, the investment bank thinks. That would be one catalyst for the shares. Another, naturally, would be the announcement of a permanent boss and a better idea of whether BP will join its peers and allocate more of its capital to hydrocarbons.
Capital expenditure is expected to come in at the lower end of this year’s $16 billion to $18 billion target range. That is the result of some potential acquisitions “not meeting returns thresholds”, according to Auchincloss. It is plausible that potential deals now on ice are those in the low carbon sector, analysts at RBC Capital say, where valuations are harder to justify as interest rates have rapidly risen.
A fall in BP’s shares on the back of the Chevron and Exxon deals is a telling sign that the energy major remains vulnerable to a takeover tilt.
Advice. Hold
Why. The shares are cheap but there is a lack of strategic clarity
Charlie156, I have no issue with BP as a whole. I have no issue with the results either.
I do have an issue with a sleeping board, they had plenty of warning re Looney. It's was the big secret. No plan B! It's obvious they should be replaced.
I have no issue with green stuff either, but BP should stay in areas where they have core competences and add real value ie liquids and gasses. EV charging fits with the forecourt infrastructure, so that's ok also.
Dr P
Good points.
I’m surprised no-one comments on the ‘methane from rubbish dump’ project. `According to BP it produces 4 mmscfd of gas which is used to generate power at the site. That’s only 20 MW. And how are ‘reserves’ assessed? Is more landfill needed to make more methane? What are the commercial characteristics of this project? If it is attractive, why aren’t there hundreds of similar plants all over the world?
More recently buried waste will produce more gas than older waste. Landfills usually produce appreciable amounts of gas within 1 to 3 years. Peak methane gas production usually occurs 5 to 7 years after wastes are dumped. Almost all gas is produced within 20 years after waste is dumped; however, small quantities of gas may continue to be emitted from a landfill for 50 or more years. A low-methane yield scenario, however, estimates that slowly decomposing waste will produce methane after 5 years and continue emitting gas over a 40-year period. Different portions of the landfill might be in different phases of the decomposition process at the same time, depending on when the waste was originally placed in each area. The amount of organic material in the waste is an important factor in how long gas production lasts. The takeaway is that to create a material business BP needs many landfill gas projects.
https://www.epa.gov/lmop/landfill-gas-energy-project-development-handbook
Likewise, the wind disaster offshore USA. A $500 million write off. Even the Mukluk exploration well in Alaska (‘most cost dry hole in history’) was a $340 million write off (in 1980 money). At the time, between the decision to drill and the actual drilling, there was evidence that the well would fail - but no-one had the courage to intervene.
And that looks to me how BP has stumbled into a series of strategic blunders, egged on by consultants, but lost the ability to say ‘no’ to some projects, with a dysfunctional leadership which took its eye off the ball. Ethics and compliance suffered from weak management with inevitable results. Quite how the Board managed to let this happen is probably an example of ‘groupthink’.
But you are right, a change of course is needed before it’s too late and not surprisingly depends on the appointment of a new CEO with the courage to renew the leadership team, enjoy support from the Board and inspire the markets.
The share price doesn't lie - its no coincidence that US peers are trading on significantly higher multiples.
This forum is becoming like a football phone in. One slightly dodgy result and the call goes out to sack the manager and remove the board. I had to check if the share price was still under £2. BP is a well run business with its O&G metrics all going in the right direction. Biofuels and EV are guided to bring a 15% return, hydrogen 10%, retail margins and basket size are growing every quarter. These results have been skewed by uneventful gas trading and provisions for offshore wind, which are sector wide. Auchincloss knows what he's doing, Dudley said recently 'BP has great people, great assets and great cash flow'. He should know.
Morning, Any ideas on why its taking so long to Appoint a Permenant CEO. It seems that the current interim may not be in the running as i would have thought he would have been cnfirmed by now.
I do think although we are hearing the rhetoric on net zero targets remaining, a new CEO has one and one opportunity only to reduce these targets and thats his/hers first three months in the job. It'll be a big call call but for current shareholders theres only upside - no incoming CEO will cut oil further due to SP pressure, so they either stay the same (SP remains) or they cut reinvent bp strategy (SP booms)
Today's SHELL results shows what a powerhouse the company has become. Imagine where BP could be if we didn't have 3.5 "dead years" under Looney's stewardship. BP traded pre Looney through the Bob Dudley years at approx 4/1. That implies a current share price of £6.5 - £6.75.
IMO, That lost value cannot be returned by the current Interim CEO. Nothing short of a full reset will do and a complete ditching of NET ZERO policy.
Will we see £6 again so depressing.
"It no longer wants to build renewable capacity on the back of long-term electricity contracts."
"Instead, BP wants to focus on more profitable niches such as hydrogen and biogas."
Critically important! It means they have seen the light and intend to stay within their (strong) core competences. Very very good.
From FT
Yet the turbulence at BP masks a company that is relatively well positioned to navigate the energy transition.
Third-quarter weakness was the result of BP’s gas trading business, which is inherently volatile. Oil and gas production — still very much the engine of the company — posted $3.1bn of operating profit, higher than consensus estimates.
The good news for investors is that Resilient Hydrocarbons, as this division is now known, really is surprisingly resilient. BP — which expects to pour some 60 per cent of investment in upstream from now until 2030 — reckons that liquids production will grow by 3 per cent a year on average until 2027. That could be particularly juicy if — as the World Bank has warned — oil prices were to spike on geopolitical and supply security concerns.
On top of that, BP also has a low-carbon strategy, which makes sense. It no longer wants to build renewable capacity on the back of long-term electricity contracts. It learnt the perils of that approach the hard way: in the third quarter, it wrote down two US wind projects by $540mn after the State of New York declined to pay more for power
Instead, BP wants to focus on more profitable niches such as hydrogen and biogas. Concerning the latter, it bought the Archaea landfill business and believes it can make returns above 15 per cent. The power it does produce it plans to use itself, for its clients and its operations.
Growing oil production and profitable renewables suggest BP will make more money than its share price implies. Indeed, its free cash flow yield is set to rise from 13 per cent to 15 per cent in the second half of the decade, says Bernstein, a broker. That is among the highest in the sector. Such a cash gush should be attractive for investors — and potentially rivals too.
Https://www.livecharts.co.uk/MarketCharts/brent.php
Good morning
Hope you are all safe
Richie, the divi yield is only part of the story the share buy backs push the yield up, i believe to around 8% >most impostantly the O and G sector is generating huge amounts of cash just now and the people who believe humans are the major cause of climate change are forcing institutions to ignore the great returns on offer.
Notwithstanding all of the above I heard someone say on bbc this morning that BP could be taken over by Shell , so I would get back in now If I had just sold.
Good luck with your 450. LTH
Rich
''currently 4.63% ''
that would be comfortably above ftse100
'' I'm now waiting for SP of £4.50 before I get back in''.
Are you extremely patient
Theaky: ref " He must Go along with the entire Board of Directors as soon as possible."
I totally agree; they are not fit to run BP.
What can we do though? Hopefully large shareholders are on the ball and expressing their views!!?
Fot those of us of a certain vintage the SP is like a
Yo Yo. Hope it soon moves on to realistic sP