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So, I am definitely a mug, as I am waiting for the oil price to rise, so I can offload some shares at a higher value than it is currently. We should creep up as more oil will be consumed as oil is lower price in January.
Predicting OP is a mugs game isn't it GfG? Still, there's always a mug who'll try...
A quick look back at OP over the last twenty years is interesting.
The chart below of Brent is a weekly one, with an annual (52 week) moving average in blue and a five year moving average (orange) and greyed areas indicating periods when OP dropped below $70 - accounting for about 45% of the time:
https://invst.ly/13eudf
It’s a reminder that OP today is cheap compared to the four years (2011-2014 inclusive) when OPEC was not challenged by the boom and bust years of US shale. A period during which many small shale producers were forced to overproduce in order to cover the cost of their debts. Since the last ‘bust’, triggered by a price war with OPEC followed by COVID, the weaker companies have gone and there is now more discipline in the US. Nevertheless, production there will probably keep the price below $100 and the question is where is the ‘sweet spot’ that satisfies the powerful producers? And what price is going to be high enough to sustain exploration for replacement reserves and stimulate green transition? Cheap oil is not as good as it sounds for society.
My guess is that, much as US Presidents would like to see WTI around $50, the price for Brent is unlikely to fall below $60 in future, with the mid-point somewhere between $60 and $100 - so maybe averaging around $75- $80?
Apologies on the dividend:" BP also hiked its dividend by year-on-year 10%to 7.27 cents a share in the fourth quarter."
BP's results have been well-received - analysts views seem to vary between "profits plunge" on a replacement cost basis & the 4th Quarter 2023 being ahead of forecasts at $3 billion - so choose your weapon really.
A lot of soundbites like cost-cutting, choosing the highest project returns. delivering a simpler more focused and higher-value company. Maintaining the dividend & increasing buybacks to entertain shareholders. It seems to conflict with the continued strategic development of renewables though, with often low, spasmodic, unreliable profitability.
I can't help thinking that when the euphoria disappears from the results and the realities set in again: "if you do what you always do, you get what you always got!"
The first half hour of trading this morning has repaired most of the October 31st damage to BP and restored it to near par with Shel - with BP down nearly 9% since Oct 30th and Shel down 7%: https://invst.ly/13bafn
Eyes will be on BP on Tuesday: how will their results compare to Shel and other majors?
BP has tracked Shel fairly closely since its fall of around 8% relative to it in October.: https://invst.ly/13b3l8
Is it going to take another step down or will investors think the ship has been steadied?
Meanwhile, Brent has pushed the green trend down here: https://invst.ly/13b3up but may yet hold onto a less demanding version of it rather than slipping further.
Occidental CEO predicts 2025 oil supply shortage:
https://oilprice.com/Latest-Energy-News/World-News/Buffett-Backed-Occidental-CEO-Says-Oil-Shortage-by-2025.html
Looks like a few shorts getting squeezed:
https://oilprice.com/Energy/Oil-Prices/US-Crude-Oil-Could-Be-Ripe-for-A-Short-Squeeze.html
I couldn't agree more! All "Property is theft!" (French: La propriété, c'est le vol!) is a slogan coined by French anarchist Pierre-Joseph Proudhon in his 1840 book What Is Property?
On this basis it puzzles me why you lot have vehicles that require fuel in the first place though! I thought even dysfunctional families provided their progeny with a decent pair of clogs! You'll be wanting a hot meal once a week next!
US charging Iran with evading oil sanctions:
https://oilprice.com/Latest-Energy-News/World-News/US-Charges-Iranian-Oil-Trafficking-Network-Over-Sanctions-Evasion.html
This week’s drop in OP has knocked it off a promising trend but, like busses, there’ll be another one along eventually:
https://invst.ly/13a2vy
Another thing about OP is that you can always find a headline that matches your pov:
FT: ‘The days of $100 oil prices are over'….Demand will continue but potential world supply is likely to peg back the cost.
https://www.ft.com/content/57f1ad77-119f-42df-a1ff-3d57df70ba80
OilPrice.com: ' Chevron Returns Record Cash to Investors as Oil and Gas Output Hits New High
https://oilprice.com/Latest-Energy-News/World-News/Chevron-Returns-Record-Cash-to-Investors-as-Oil-and-Gas-Output-Hits-All-Time-Hig.html
I didn't read the FT article (I assumed a paywall ) but I assumed it overlooked the ongoing fall in identified global reserves?
Ultimately the world will need Oil to be expensive in order to drive transition to alternatives. Cheap oil is bad for everyone.
Boyo - the gap analysis is really stark. It appears to start to manifest itself and widen from around January 2022, so that its not a particularly recent phenomenon but becomes much more potentially serious from starting around the middle of 2023. As you say from October 2023 it accelerates to looking really serious, basket-case/ recovery play territory.
It seems the market is dictating through the share price malaise that enough is enough & a major change of strategy is needed. It is becoming increasingly less concerned whether the impetus for this is internal or external. Your graphs indicate that steadying the ship, or more of the same, are not going to be viable options.
I put a couple of dividends from Shell into BP recently & will probably develop this further.
It looks like a stray rocket might impact the OP next week! Have a good weekend.
Absolutely GfG - regarding BP:
Looking at BP against Shel since 2019, it’s apparent that BP has slipped by more than 15% in sp terms:
https://invst.ly/13a1y2 .
All of which has come during the recovery from the mutual low point of all the majors in October 2020.
But whilst BP’ volatility usually dances around Shel - and has made them a useful pairing for investors who trade between the two, BP has crashed out of its ‘covid recovery’ trend since the dreadful drop and gap down in October, shown more closely here:
https://invst.ly/13a21d
So, depending on your viewpoint, it’s either a basket case or a recovery prospect with better upside potential than Shel.
OP dropping by $4 since Thursday’s statement did not help the promising recovery in Shel’s sp did it?
Here’s the week’s OP v Oil Co’s chart:
https://invst.ly/139zr1
Yet despite the wobbles, the sp remains just about on the upward green trend for the moment:
https://invst.ly/13a1mp
Good to see that the total divi for 2023-4 will be $1.29, up from $1.03.75 in 2022-3. And that regularly increasing the divi by a small amount seems to have reduced the level of ersatz outrage in the media that used to greet each raise. Although the drop in profits will have helped as well.
Still a very long way from the $1.88 we got annually from 2016-19. But at least I topped up by roughly 50% during the covid dip, so my total Shell income will at last be back to 2019 levels this year.
Apologies by "oblivious" I obviously meant obvious! Quite funny really!
The market reaction says it all. Shell exudes confidence, consistency & belief in the future of the business. As D says the $3.5 billion buybacks are clearly paid for by an (8.5% ish increase in debt). A really bold statement that Shell believes it can outperform the cost of debt.
Also it is clear that Shell will not be slavishly tied to increasing the dividend by 15% in the final quarter each year. It will be increased when business results justify it.
This will make the BP's results on the 6th of February even more interesting & BP will for me most likely look even weaker and more vulnerable after them! Even if BP tried to emulate or simply copy Shell's business strategy, they are well over a year behind them & still without the will, leadership or Board mandate enabling a change of strategy at pace.
BP are weak and getting weaker. The weakest and most oblivious target in the sector, when several of its peers have already recently ceded their independence, they are becoming a primary target for the predators that are circling around!
My money would be on a predator announcing a hostile bid, and then Sawan coming along as a saviour with an agreed merger/takeover. Whatever else this looks like the beginning of the end of BP's independence, they have not shown a glimmer of hope that they can save themselves so far!
$43 billion sure is a big number but it has to be taken in context.
For a smaller company with a market cap of say $50 billion and other corresponding figures for cash flow, profit etc that would be worryingly large
For Shell $43 b is very manageable. The key ratio is gearing rather than the absolute amount which is currently around 18.8%. Anything under 20%-30% is comfortable and indeed some investors might complain that it's too conservative.
Have a look at gearing levels for some other companies / sectors. For example utilities will be MUCH higher but remember they have different income profiles, regulated asset bases etc.
Confidence that they can get a better return than the cost of the debt?
Just wondered if anybody has any idea why Shell keep their debt so high. Currently 43$ Billion which they seem very happy with.
Would have thought that they would have taken the opportunity to pay a bit more down than they have down?
SHELL 4Q ADJ PROFIT $7.31B, EST. $6.14B
SHELL ANNOUNCES A SHARE BUYBACK PROGRAM OF $3.5B
SHELL 4Q NET DEBT $43.54B, EST. $40.07B
Q4 Production and dividend ahead of consensus
More Burnbacks 3.5bn USD.,...sigh!!
The daily chart today (Wednesday) makes things look rather worse than they are: https://invst.ly/138i6u
A 15' view shows that the sp has held pretty level over three days despite a drop in OP: https://invst.ly/138i53
Thursday will be the test.
I often say that the sp follows OP except when it doesn’t and the fact is that although the two are related the sp does have other significant influences (like nasty impairment news) which ordinarily play a more dominant role. Then there's the tendency for the sp to filter out much of OP’s volatility. This comparison of the two since mid October demonstrates this quite well:
https://invst.ly/137op3
The sp may well be less volatile than Brent but , as I mentioned previously, it is currently running about £1 down compared the trend in OP which has been steadily rising since the year began. There's also that gap up to 2566 beckoning to be filled at some point. It’s a shame about the much smaller one down to 2440 created on Friday with the sharp bounce back towards 2500 . It's possibly small enough to ignore whilst the price is rising. The scene is therefore set for the results to overshadow the recent setback, which was fortuitously announced well in advance.
Https://www.fool.co.uk/2024/01/29/mega-profit-shell-could-be-the-ftse-100s-best-value-stock/