Member Info for Jimothy

Thanks Moreyou, always good to have some validation that my own sense of truth has not become warped!

I had a thought earlier - some share save options will now be maturing below the strike price, which I am guessing means BP will pay out cash to those employees rather than shares from treasury. If that is the mechanism then you'd expect to see a spike in BP debt (but a healthy drop in share count). I wonder if that's what we are seeing now.

Disregard debt repayments, they are from divestment.

$70 a barrel for breakeven without buybacks?

Capital markets day said balanced around $5bn a year dividend plus $3-4bn a year buyback, and debt repayments at $74 a barrel in current money.

Only one of those statements can be correct.

PS

Would be great to see an update on that at next results - sort of offsets an expected drop in buybacks if we foresee that we are "over the hump" of a one-off share award. Good news will be in scarce supply for the presentation deck.

Well, that’s a perk and a half in a cyclical industry.

In any case that doubles up the max average drawdown, if you include management extras it’s probably 200m per year.

Still suggests that the recent treasury draw downs have, at least partially, accounted for the Covid special.

We’ve seen two tranches of 200m shares taken from treasury to cover share awards, over 400m shares in total.

I’m hoping that covers the exceptional share scheme that was offered (in lieu of bonus?) during covid.

Quick maths on share save - £250 a month is £3k per year per employee. Let’s be pessimistic and say all options are £3 per share, that’s 1,000 per employee.

Say 80k employees (pessimistic) and that’s 80m shares per year if all use share save options to max extent. (Plus extra for senior management).

So it looks like treasury share down of 400m+ would have been the covid special share scheme. If correct, the draw down of this magnitude is a one off.

IG is the best for futures I find. FTSE100 here, currently 7800, so a good recovery alongside S&P500 price action today.

https://www.ig.com/uk/indices/markets-indices/ftse-100

Given turmoil in the hydrocarbon markets, I'd expect that energy majors that generate a higher percentage of their revenue from other assets to have most resilient revenues. BP may have a higher % of net debt, but trading, service stations, lightsource etc should cushion the blow in comparison to others.

If input costs drop sharply, but output costs drop more slowly there could even be some recovery in refining margins.

BP has comparatively higher debt than competitors, so lower margin per barrel produced. With brent dropping USD 75 to 70, it's viewed as having a more significant impact on BP bottom line.

You could also argue that BP is better diversified as some of the higher staff numbers are employed in petrol station retail etc, so the relative drop feels over done.

Time will tell, the Tangerine Twit with his laughable tariff formula is rather unpresidented.

From BP own release:

As part of the agreement, bp’s remuneration will be linked to incremental production volumes, price and costs. bp will be able to book a share of production and reserves proportionate to the fees it earns for helping to increase production.

Expect to see decent recovery in BP reserves when share of initial 3bn Iraq barrels factored in. Could grow to share of 20bn in time. Further details of % split don’t seem to be released yet.

Elliott now shorting 0.5% on Shell as well as long 5% on BP.

Interesting development.

Seems that Elliott have given some guidance on growth messaging. I hope that’s $200bn on current (or reduced) share count though…

I also have a suspicion that the coy responses around details of $20bn disposals / debt paydown are to allow manoeuvre room for anything with Rosneft to play out. Castrol appraised for value as plan B disposal. That’s purely my own speculation though.

They've issued the summary notes and headlines, but Murray (and I assume Kate) will talk us through a presentation with Q&A as far as I understand.

https://www.bp.com/en/global/corporate/investors/results-reporting-and-presentations/2025-capital-markets-update.html

Brb, notes to write for a little call this afternoon

I do agree with the view that a proven integrated oil company with hedging in well-vetted (and returns generating!) renewables / adjacent-industry projects makes a good, diversified, business case. Hence my investment in BP, which I'm hoping will do well after this much needed fat-cutting programme gets underway.

Hopefully the communication of that message comes across stronger today than previous attempts, we'll see at 1300.

Short of announcing sale of business parts, what more could have been expected?

- Company committed to returns-focused activities

- Embarking on cost-conscious operation (though I do wonder how much of the £5bn saving will be down to divestment...)

- Assessing future for Castrol, Lightsource... against target financial metrics

If M&A talks are active, that's unlikely to be for disclosure at this point anyway.

Personally I would have targeted maintained buybacks AND debt reduction through divesting, but that might be a challenge if the oil market is weak over the next 12-24 months.

Seems a good, and credible, update to me.

Https://www.marketwatch.com/investing/bond/tmbmkgb-10y?countrycode=bx

PHNX trades inverse to that chart. Gilt yields appear to have topped. PHNX value will pick up as yields come down, whether the SP hits £6.50 in 6 or 24 months is debatable, but that's the value proposition if you believe inflation / interest rates are on the way down in the mid-long term.

SP will rise strongly as soon as gilt yields have been flat / trending down in previous 6 months since the respective figures release date as the IFRS calcs will move to showing a paper profit rather than paper loss rather quickly on results at that point. Either that or the buyout rumour mill picks up again just before that, leading to the same outcome.

Take the 10+% yield for now and wait for the inevitable capital gain.

I expect that Auchincloss is ranking asset bundles on a %ROI basis, compared to expect value from sale and will be putting bottom performers up for sale.

Net result is a somewhat diverse energy operator (no bad thing when oil bears are out in force) but with a streamlined portfolio of efficient assets. Feels logical and seems a likely approach to me (the German refinery being a low performer).

Of course there’s a question around should BP own / operate fringe assets or put them in a JV / operating company it has equity in for efficiency.

I also note that you mentioned Rosneft earlier - it seems safe to write that value to zero. If anything is ever returned from the dividend pot, its value will be so low due to ruble depreciation. Not worth considering at present in my view.

Agree Jakers.

For reference I’m just talking general valuation and SP in 12 mos or so. BP won’t be out and out purchased, but the sum of the parts is more than the whole. So disposals into debt reduction / buybacks would be my expectation (which lines up with communication).

For what it’s worth, I wouldn’t be surprised to see buybacks remain at current levels alongside debt paydown - if it can be funded through asset disposal. With a slightly “leaner” far more efficient BP to show for it.

Buybacks above expectations, coupled with debt reduction would help mitigate the market reaction to what appears to be a poor Q4. (Note that Q3 was a consensus beat, but overall drop in earnings dropped the SP anyway, tells you all you need to know about best case on the day for Q4 results!)

$10-15b a year is ballpark for general BP underlying replacement cost profit.

- Current policy is 80% dividend / buybacks and 20% debt reduction (pending strategy update)

- Circa $5b dividend / $7b buyback at present (pending strategy update)

We were discussing an optimistic case for the coming year, so if we take underlying replacement cost profit as "earnings" (for simplicity), a market view on BP could be a PE of around 10 (optimist case). Multiply that out on the high end and you get Mcap of $150b for 15b shares (in 12 mos), $10 (£8-ish) per share.

That's all finger in the air to work out approximate best but plausible case for reference against the £10 per share that's been written on here and by some random Barclays analyst. Earnings are likely on the low end of that bracket for the next year though so it's certainly not my base case, though if oil market sentiment turns it's not impossible.

More realistic scenario over coming year (my view):

- Year underlying RCP: $12b

- PE 8x

- Mcap $96b

- SP $6.40 (15b shares), GBP 5-ish

Very, very simplified but something as a baseline. See what happens with the annual results / strategy update.

Agree with you that there is an element of market cycling into energy to come into play medium to long-term, as well as currency devaluation (how else are low-growth western economies going to handle their deficits).

Difficult to put a figure on these, hence why I stick to financials as a base line.