Member Info for Jimothy

So say in 12 months there are 15b shares in circulation. That would put BP market cap around £150b / $200b.

BP yearly free cash flow looks to be in the $10b-15b region under general market conditions, once tidying up is done around write down of refineries / streamlining of returns-producing assets. At 10x the upper end of that you'd hit $150b, or around £8 per share, which I would say is an optimistic scenario.

Any reason(s) for the £10 target specifically?

I hope this is the case. A 1-1.5% dilution attributable to pandemic challenges in the energy sector I can understand, if this is the reason for bumper share issues this year and last.

However, if the new normal is to expect issue of 200m+ shares per year, that effect compounds and affects my valuation.

I think we'd all appreciate some chart that shows share scheme purchases each year, and the forward impact that any match will have on shares in issue.

The discussion of shares vesting in March 2025 has also been cryptic, the fact that a number was not mentioned makes me think it was large. This is information that the board clearly have access to (and had access to on the Q3 Q and A). Hopefully it is included within the 230m shares issued from treasury, but confirmation one way or another would be appreciated.

Suspect we may be waiting until Feb 2025 for that though.

"The maximum amount allocated to the second share buyback programme is around $0.3 billion for a period up to and including 30 September 2024."

The shares issued from treasury yesterday have a value around $1.1-1.2bn. I'll grant that some of this is covered by the secondary buyback announced July 30th, but only around a quarter. Less given that the share price was higher during the buyback period.

I'd really like better visibility of the forecast shares BP expects to issue as part of share save in coming years. A quick scan of RNS releases:

2024: approx 230m shares issued

2023: approx 200m shares issued

2022: approx 50m shares issued

There's a real lack of visibility for those who have not worked at BP. Issue of 100m+ shares on an annual basis affects forward valuation metrics.

Perhaps one to submit for the next Q and A.

Seems very likely that ADNOC would reconsider part acquisition given share price slide. Whether that’s a stake in the full business, or full purchase of subsidiaries. Auchincloss has more or less confirmed that sale of parts is the base case anyway with a leaner, more efficient BP.

Only seems a positive for shareholders as BP trades cheaply compared to its competitors by book value, cash generation etc, so this would unlock value at a premium to the market price and place it back in shareholder pockets one way or another, as well as de-risking BP operations by allowing it to focus on its strengths.

Long tunnel, but there’s light (somewhere…)

I suspect we’re at the tail end of Looney decision damage now and firmly onto steady hands management, 2025 can only be an improvement.

Quick maths says:

$1.75bn buyback per quarter

350m shares at average £4/$5 per share

Under 2 months buybacks to counteract the effective dilution

So all damage undone around Valentine’s Day. Somewhat ironic given the circumstances around Looney’s departure.

I’d assume they timed it so that dividend payment tomorrow offers some support from anyone re-investing.

What can you say, red is the Christmas colour.

I assume this is the hit from the insane Looney-era share distribution?

That’s about 3 months worth of buybacks at present rate.

Thanks and no problem.

Present day BP appears to have a sensible decision making process - projects are given the go-ahead based on ROI figures rather than "throw money at mega-project concepts and hope it sticks" or any "wow" factor, which appeared to be the case under previous leadership. The team today are financially trained and driven - they won't steal the show (for the right or wrong reasons) at a talk, but they are making the longer term sensible business decisions. It is the no-frills leadership that I love to see in my long term investments, and I'm rather a fan of the BP that Auchinloss is honing.

That said, BP appears to have a comms issue around that consistency narrative. This will naturally address itself as solid projects come online (Kaskida in GoM, Caspian production increases, BP Bunge biofuels production...) and deliver even in a lower oil price scenario. But you need to really read between the lines in their reporting to come to that conclusion, so a comms issue at this point as this should be more apparent.

Error on my end - 4bn shares repurchased is a saving in GBP 1bn per year in dividend payments for the company.

It's a saving of 1.28bn USD per year.

BP should slip below 16bn outstanding UK shares as of either the RNS following shares purchase yesterday, or the one which will be published this afternoon.

That's down from 20bn outstanding mid-2021.

4bn UK shares cancelled = $1bn a year saved in dividends at current rates. I appreciate that the value of buybacks vs debt repayment is always a balance, but cost of debt only looks to be going down while dividend per share looks to be increasing, if we look ahead a few years I wouldn't be surprised to see a cost of debt at around 5% or less, whilst 3-year fwd dividend yield is likely 7.5%.

That's the value in buybacks over debt repayment at present. The tipping point in that proposition seems to be at circa £5 a share. Though of course, debt repayments should always be sufficient to keep the borrowing cost optimal, which it does seem the board is achieving.

Choppy waters of late in the oil market, but BP is on firm footing and generating ~$9-10bn a year in cash, double it's dividend payments, in this challenging market.

Thank you for sharing. I'm not seeing any obvious indication of scale of the dilution impact in March 2025 as the "one off employee equity grant" does not appear to be quantified. However, reading between the lines, it seems the impact will be far less than a month's buyback (even if this is reduced to $1Bn per quarter).

Overall I'm feeling more positive anyway - the question around 60,000 employees each gaining £25k of stock/options was alarming without any sense of proportion in Kate's response.

Most positively - gas and low carbon is now delivering decent returns (I assume due to Bunge acquisition and others). With refining margins expected to improve, I see quarterly profits keeping a baseline of at least $2.5bn, even if Brent takes a visit to 60 USD. That funds the present dividend and a $1bn a quarter buyback, as Murray has stated on various presentations.

Not all doom and gloom, given another 12 months I reckon Murray will be seen as the steady pair of hands that shareholders appreciate in a CEO.

They kept that one quiet up until now.

What’s the damage in terms of share dilution? I’m struggling to find details of the scheme.

From BP 2023 results:

Cash and cash equivalents at end of year 33,030 million

BP has a third of its own market cap in liquid assets. The company can invest in a portfolio of future assets showing suitable business cases, continue or increase share buybacks and continue or increase dividends as it pleases. Capital is not a constraining factor, finding projects of a suitable business case to attain the desired risk profile and returns is the limiter.

Note that the current buyback and dividend levels cost the company around $12Bn per year, whilst it earns $14Bn a year in free cashflow, this is after capital expenditure to maintain production.

Suffice to say, there will not be a rights issue.

The further away the better for £6. This makes upcoming months of buybacks more effective at reducing number of outstanding shares.

- Free cash flow of $14B, around 14% of market cap

- For reference, dividend at present is around $5B per year, with buybacks at $7B per year

- BP also has $33B in cash as of 2023 results...

BP could double its dividend without batting an eyelid, if it chose to do so. It could offer a special dividend of £1 or more per share, if it chose to do so. Not only that but oil prices look to be pushing higher this year and next in comparison to 2023, and the shadow of the Gulf of Mexico payments is coming to an end around 2030. Add to that the recent push for $2Bn in operational efficiencies, and a growing BPX shale business with low breakeven and free cashflow is only going higher.

This will hit £6 of its own accord.

Keep in mind that had the USD - GBP rate remained where it was in mid-June, the share price would be sitting at around £4.70. In many respects the USD denominated shares are a more consistent performance benchmark.

Oil is range bound at present, the GBP is overbought vs the USD (starting to correct, this will have a positive effect on the GBP price per share) and we've seen a heavy reaction to BP's prelim Q2 update.

Oil at $80+ represents serious cashflow for all majors, who are free to boost dividends and extend buybacks. This is also the year low in the share price. I would suggest this is a keen buying opportunity.

Igor,

BP's present valuation and income projections assume zero value from Rosneft. Any change to this situation would represent a substantial upside to BP's valuation / income, although this appears unlikely in the short to medium term.

Trump may have claimed that he will "stop the war the next day" but, even if he wins the election, he would have no real means to do so. Read what you will into that situation and a presidential candidate who makes firm commitments which has no control over delivering. A ceasefire would drop oil prices undoubtedly, but may also enable BP access to it's Rosneft assets. I could not say whether this would be a net upward or downward pressure on the share price.

Michael Burry holds a diversified portfolio of which ~6% is invested in BP as per a quick search. Keeping 6% invested in oil/energy stocks is likely just part of that diversification. However, the fact that he has chosen BP suggests that he, like many on this board, view BP as undervalued in comparison to other oil majors and likely to see the greatest upside in the coming months and years.

https://valuesider.com/guru/michael-burry-scion-asset-management/portfolio

If BP management targeted all shareholder returns as dividends, this would be yielding 10%+. Which, ridiculous as it sounds, would be sustainable on cash flows.

The share impact on write-down of a low-returns asset in the German refinery is laughable, this just shows BP is focusing capital where it has best returns and pulling out of low-return operations, as any sensible company should.

Buy out 10% above previous 12 month highs? Fine. No buyout? Fine. BP is off the chain as a value proposition.