The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
From my understanding;
Under IFRS you only account for the mark to market value of the LNG hedges and as the value of LNG increased rapidly, the value of the hedges had to be written down. As the price of LNG drops the value of the hedges would increase, or as the cargo is delivered the profit would be accounted for on the other side.
Purely an accounting issue and not a real term loss hence the bonanza underlying profit.
I expect that the write down to come back through the accounts as profit over the coming quarters, hence why the stated that it would unwind over time.
With the gas price somewhat stabilised, I would expect a much better headline in the Q4 report and another good chunk of underlying profits.
DYOR
No, the divi is well covered and the first call on cash. The first step to any lost cash flow would be a reduction to the buyback program but as we are already 2/3 through Q4 I would expect the buybacks to continue in early 2022 (unless the outlook has drastically changed moving into next spring).
Hi, Gary. Thanks for responding. It's interesting to hear what others think and to find out new information that (upon further research), might change your investment decisions for the better. So I am genuinely interested in your view and information here and am always happy to learn something new.
I've looked into the shares in issue at BP from 2010 when there was approx. 19B share in issue and around 2B held in treasury. Fast forward to today and there are approx 20B shares in issue with only around 1B held in treasury.
The treasury shares seem to have been utilised for employee share options from what I can (although I have only found this through old RNS feeds).
Apart from some stock splits along the way (a bit different to a rights issue to raise capital), I can't find any information that BP have carried out rights issues historically. Do you have any further information on this?
BPs strategy today is to buyback shares utilising =60% of the surplus cashflow (now defined after the company have repurchased shares to cover vests under the ESS), so the overall share capital in the company should reduce nicely through to 2025, IMO.
McMonigle of IEF suggests OPEC may reassess their strategy in light of external factors, such as SPR release or further lockdowns in Europe.
https://www.ief.org/news/ief-holds-talks-with-japan-on-energy-market-volatility-and-investment-crisis
"In light of current IEA, OPEC and EIA forecasts for a surplus in the first quarter next year, I anticipate OPEC-plus energy ministers will maintain their current plan of adding more supplies to the market gradually. However, certain unforeseen external factors such as a release of strategic reserves or new lockdowns in Europe may prompt a reassessment of market conditions,"
My understanding in this area is that for a liquid stock traded on the LSE the SETS system will match sellers to buyers and when a price is agreed a transaction will occur.
So if someone sells 1 share in BP then somebody else has to have bought that share. If that’s the case then how can the sell volume be higher than the buy volume?
My understanding is that institutions don’t make markets for highly liquid stocks in the FTSE100, it isn’t AIM.
So the price drops when nobody is prepared to pay your ask (i.e. there are no bids in the system that meet your requirements).
Like Smithy suggested, the amount of shares bought back by BP are not big enough to prevent slight downward pressure in the short term, but should produce upward pressure over the longer term.
Happy to learn otherwise or to listen if anyone has further clarification on this.