G's sp24 Jul 2019 11:20
Is G's sp really as unpredictable as many here seem to think?
There is a very recognisable long term pattern with G, which consists of periods of arguably excessive investor anticipation which drive the price to unsustained peaks followed by disappointment when company guidance and/or results fail to match expectations and the price swings the opposite way. The cycle pre and post recent H1 and FY statements adequately illustrate. It’s a delicate balance for the company’s Press & PR team, especially when investors appear to read too much into too little.
In addition to this roller-coaster of extremes, there’s the underlying price of oil - itself a volatile and unpredictable factor. The two together are certainly a cause for much PI angst and frustration. The inevitable decline of global oil demand in the very long term (10-20 years?) introduces another layer of urgency upon G for it imposes a distant but approaching horizon which only the majors like RDS are more actively planning and diversifying for. It’s where the gas should, by now, have played a part.
Have we already passed 2019’s best for OP? Should we sell before October in anticipation of another autumn collapse? The immediate crunch question for me is ‘How low might OP go in the next 12 months?’ $55/bbl seems a prudent guess. And 2.7 x 55 = 148p gives me my downside figure for G in that event, although buybacks may well support it to 3 x 55 = 165p. Upside for me would be $65/bbl, with 3.5 x 65 = 227p. Note that the multiplication factor improves with a stronger OP and 3.5 is the best we’ve seen since last summer. Let’s hope the upcoming H1 results inject some tangible reasons to be cheerful and improve those multipliers.
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