Member Info for Boyobach

The last five days G/GKP/DNO v Brent: https://invst.ly/br5mf
Interesting to note that buybacks were not in progress on the first of those days but G was already moving positively

I agree with Bunks about the price holding up well today, although It appears from the RNS that only 36,435 shares were bought back which, unless I’m mistaken, could be the lowest number for any active bb day so far. Yet, surprisingly given that factor, G’s sp seems to have increased in strength v OP and the magic ratio moved up to just below 3.1 x (181/58.7), with around £5m possibly left in the budget by my estimate.

Here’s G’s recent relationship with Brent, the chart is ‘in sync’ with GvBrent at Peak OP on 3rd October - so if G is above the green Brent trace then G has improved in strength since that date: https://invst.ly/br5qk

A fair response by G to the increase in OP during the afternoon. Nothing exceptional though - the G:OP ratio holding at an unremarkable 3.01 x.

The last five trading days G/GKP/DNO v Brent: https://invst.ly/bqjia

All the runners and riders from Peak Oil April: https://invst.ly/bqjkk

And from Peak Oil October: https://invst.ly/bqjla

Guys - I get the benefit of doing the 'end of day' summary with hindsight. If I was as smart as my comments then I'd be doing a whole lot better than I am!
Hawkey - I tend to buy when I think it's approaching the bottom rather than when it's going back up. JL (I hope he's reading this and will correct me if I'm wrong) would, I believe, time his buys after he had had better confirmation of a positive direction. There are risks/advantages either way - I invariably buy in small tranches (unless I'm feeling really confident) but sell in larger chunks if I've hit a particular target or limit (because it's never wrong to take a profit and you can miss out by being greedy) . I certainly don't think you were wrong today - unlucky, maybe, given that the buybacks could generally have been expected to offer more support and for any pull-back to have been less severe than it was. But in fairness to Canaccord , they have to play a canny game to secure best value. With both GKP and G we've seen periods when the price has been allowed to drift back down. Overall, I doubt you'll lose out - I'm expecting 197 as a minimum by the end of the buybacks unless oil really takes a dive from current levels.
Hasiba - Yes, we mustn't be too obsessed the day by day ups and downs. I can't resist commenting when the day's action looks interesting but in reality the hour by hour moves do not change the big picture although hopefully they might cumulatively inform us about G's long term direction and prospects. Unless there is something we are unaware of, I feel as confident as you that G should be solid from here, although my ultimate targets may be a bit lower. GLA

With Brent only a tad lower since Friday’s close but G, after a positive spike, ending about 2% down since that previous close - G’s tree got a good shake today https://invst.ly/bpk0b . Yes, the day ended on a ‘gravestone’ doji but, given everything else (including the Bollingers shown here) it doesn’t look that significant.

If the initial spike, echoed by DNO and GKP, teased out some buying interest (sorry Hawkey) and the drop back then flushed out sellers at the low end then, assuming buybacks did happen today, the strategy appears to have worked a treat. We’ll know better when we see an RNS with the numbers. It’s worth remembering that the buybacks are a value accretive exercise - the intention is to acquire shares as low as possible, rather than push the price up and pay over the odds. The G/OP ratio that I bang on about was still over 3.0 at the close, 3.01 in fact, so no ground materially lost but, equally, no progress either. https://invst.ly/bpjb7

I don't disagree Hydrogen, news that signals a tangible increase in revenue should motivate the market - that's where G came unstuck a year ago at 290p + , having implied imminent great things then rolling back.
Buybacks, on the other hand, tend to have technical effect. The last lot moved the value up v OP, by mopping up sellers at a certain level, and so will these. The question is 'by how much?' Bunks commented last week that we shouldn't expect fireworks but I think we should expect a measurable improvement. It will be interesting to see what quantity, if any, they bought back today as the price has actually reversed relative to Brent since Friday (at the time of writing- 4.15pm).

Now we are into 'phase two' of the Buybacks - BB.02 - and have more of a feel for how these are implemented and influence the sp, I’m idly contemplating what effect they may ultimately have. Bearing in mind that the average underlying sp is primarily influenced by OP rather than buybacks, it’s their potential effect on the ratio of sp to OP that’s of interest to me.

We know that BB.01 boosted the ratio from 2.7 to 3.0, so it’s reasonable to think that the second phase, with twice as much cash behind it, should achieve at least the same improvement, putting the ratio at 3.3. Although the extra cash implies that the second phase might theoretically double the improvement - to 3.6x - I’m pretty sure there’s a law of diminishing returns that will progressively reduce their effectiveness as the sp rises. In any case, 3.6x would exceed anything G has achieved this year and does look extremely optimistic. But somewhere between the two could be feasible. Entirely subjective, of course, but I’m inclined to think that 3.4 could be achievable with anything higher a bonus.

At $60 Brent, that multiple would put G at 204 and, at $65 Brent, G might then reach 221p which, as Hawkey might say, is not too shabby. Of course, if OP continues to languish around $58 then 197p might be the best I can hope for.

Yes, well said Hasiba.
Hope you enjoyed Lake Como - lovely area.
G should indeed do well from here once OP picks up - which is 'when' rather than 'if' I think. £5 would be something - a bit higher than my expectations but I would certainly not complain. Nor do I think it is impossible.
US investors very disillusioned with their Shale holdings at the moment, which is possibly why Bill went on his road-trip, to try to convince some of them that they could be getting better returns with G.
ATB.

I notice that my FC entry today is higher than Hawkey's - that's never happened before has it? So perhaps I've overdone the plant-based medication this week.

Stockbuster 185
Hawkey 188
Boyo 192
ocelot 195
Withoutt 198
Klassic 203

I re-watched that ‘Shale-maggedon’ video link that I posted yesterday. The analyst interviewed presents some key opinions backed by data:

He says that ‘Outside Investors’ - ie the market - has funded US shale growth to the tune of about 6 MMbbl/day, (approximately doubled it to 12.2 MMbbl/day ) - for NO return on investment.
If there was consolidation and capital discipline in the industry then, he continues, normalisation could occur over 16 - 30 months, with a consequential normalisation of WTI to $65-$75 per barrel as the market tightens.

WTI in that range would put Brent at $70 to $85 and G, on today’s market performance, at 210-255p

Quite separately, I think that the crunch for US E&Ps becomes ever more obvious as OPEC aka KSA turns the screw by periodically throttling back then ramping up production, teasing the price up then giving them a good kicking. Also echoing his points about consolidation and capital disciple, it's very important to note that the majors (Chevron, Exxon et al) are apparently aboard a different boat entirely to the smaller shale drilling companies as set out here:

https://oilprice.com/Energy/Energy-General/Oil-Price-Correction-Triggers-Shale-Meltdown.html

‘While shale E&Ps languish, the oil majors are not slowing down. Exxon said that its oil production rose by 7 percent, driven by the Permian. In fact, its production from the Permian rose 90 percent in the second quarter from a year earlier. Earnings dropped by 21 percent, however, and the company cited lower prices and poor downstream margins.
But the majors aggressive bet on U.S. shale is a sign of the times. Small and medium drillers are getting hammered and seeing their access to capital close off, which is forcing budget cutbacks and otherwise leading to steep selloffs in their share prices. The majors, on the other hand, are only in the early stages of a multi-year bet on shale. They can stomach losses on individual shale projects for years, scaling up while they earn profits elsewhere.’

A good week for G - considering carnage in the wider market and always remembering that sp alone is meaningless unless you know and factor-in the prevailing oil price. For example: 250p for G would not rate as ‘good’ if Brent were at $90!
So the G/Brent ratio is essential in order to make a judgement as to how G’s sp is performing. At Friday’s close it was back up to 3.06x, which is a tad above where it was at the end of the first phase of buybacks. The second phase has just started and within a day appears to have repaired the slight erosion in strength experienced as OP has dropped below $60. Just as a guide, remember that pre-buybacks the G/Brent ratio was around 2.75 - so the sp might easily have been 160 or less today - ie over 10% down.

Here’s all that and more encapsulated in last week’s picture: https://invst.ly/bo2jp

And with that cheery thought, it’s worth a review of the other runners and riders over the period since G’s buybacks started seven weeks ago in June:

https://invst.ly/bo3by

Over that particular timeframe G happens to have been the best of the bunch - by a gnat’s ahead of GKP, which is also doing well with the supporting influence of buybacks. I’m not keen on comparing G and GKP on a penny for penny basis - they have totally different numbers of shares in issue, market caps, ev’s etc etc etc. So their respective sp ratios to Brent may not necessarily be comparable under all circumstances. Nevertheless, I know that some on this board do draw the comparison because the prices happen to fall in a similar range, so it’s perhaps worth noting that GKP’s buybacks have currently set GKP to OP ratio at 3.98x , which would be a nice number for G to achieve and would be essential to place it around 250p at average oil prices in the mid $60s. RDS has obviously had a dreadful time since its result day whilst PMO, which I don’t follow, is generally more of a roller coaster and not my ‘cup of tea’ at all- what was that spike on Friday all about?

Shale-maggedon

https://uk.finance.yahoo.com/video/earnings-indicate-possible-shale-mageddon-231814517.html

https://oilprice.com/Energy/Energy-General/Time-Is-Almost-Up-For-US-Shale.html

I assume this web-page will be updated in due course. It gives a link to a .pdf schedule of buybacks so far. The original RNS's are still available of course.
https://www.genelenergy.com/investor-relations/2019-share-buy-back-programme/

Yes indeed Withoutt. His last line is profound:
'US shale oil has not only introduced a cap on oil prices, it has also introduced a floor.'

And that floor is the price at which US Shale drillers start to lose money no matter how much they pump. With the treadmill effect weighing on them heavily - ever more rigs needed just to compensate for production decline - plus the burden of debt carried but often not disclosed in the cost/bbl figures, that floor can ultimately only move in one direction.

The problem for G is whether they will still have decent oil resources when that floor is back at an attractive level. $60 will only get G to 205p on an exceptionally good day at present.

With Brent’s decline pausing at about $57.5, G announcing the resumption of buybacks and GKP’s own buybacks seeming to pick up again, there was a welcome step up for both G and GKP in the casino hour. The market got a bit ahead of itself with G, however, and the sp moderated pretty quickly, finally ending at a healthier 175. DNO remained on the launchpad but, in fairness, there was no particular reason for it to do otherwise.
https://invst.ly/bn10e

In fact, it’s worth looking back over the entire buyback period as, today, GKP drew level and overtook G in a comparison of price over the period from 25/6/19 inclusive. In this chart DNO probably gives a slightly exaggerated indication of where G might have been had buybacks not happened - it would probably have been 10% (15p) rather than 17% down but who knows? GKP’s buybacks have been effective from 8th July, the blue vertical line: https://invst.ly/bn0su

Here are all the runners and riders since Brent’s last 2019 peak in April: https://invst.ly/bn0z0

Indeed Bunks - no fireworks. The bback reestablished G's '3x' relationship with Brent, which had dropped to less than 2.7x by mid June. That seems to have held reasonably well whilst the price of oil has fallen further to today's depths. I'd hope to see the $7m buybacks improve it further - 3.2x maybe? That would potentially shift today's sp up to 183 but, more significantly, to over 205 when OP returns to $65 (as it surely must).

Indeed not Whitehat, it was certainly not a jibe aimed at you. I was using 'strong and stable ' deliberately in the unfortunate style of Theresa May, although I do happen to regard RDS highly.

Nor were my comments aimed at anyone in particular but more generally at the inexplicable incredulity of some G investors who claim they don’t understand why the sp has dropped to around 170 when there’s an established and obvious relationship between it and G's only source of revenue. Also, the apparent inability of some to recognise that peer companies are similarly affected by changes in OP even though, as with GKP currently, it can be masked by some compensating influence like buybacks.

Whilst I agree that G’s underlying long term market value does appear to be lower than it should be, day to day variations in G’s sp - particularly in relation to OP - are much more rational than many here want to admit. Unfortunately, if the market failed to spot G’s true LT potential after the FY results and when OP was heading up to $75 then we must accept that it is hardly likely to do so right now as the market is in retreat.

The confirmation of resumption today tidies that up. So about $7m left to spend on this phase.
As i thought, the AGM gave permission to buy back up to nearly 28m shares - there wasn't a cash limit - so plenty of scope if they are inclined to continue. GKP have set out a more structured plan but I think G's approach allows for better flexibility.

GKP sp is currently supported by their own buyback programme.

Agreed Bunks.
Thanks for clarification on the buybacks Hawkey - and your usual joie de vivre!