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‘Trading today makes no sense”

Mr Market is being Mr Market. He only makes sense sometimes. He is also driven by punters who also only make sense sometimes.

I agree the oil and gas business is not rocket science. But it requires exceptional management capability and competences to get it right. Get it wrong, and the consequences can be disastrous, as BP has found out many times to its cost.

Meoryou. If I recall correctly, BPs directories are required to hold a certain quantity of shares in BP by buying them in the open market. They are not on the bonus gravy train.

I am also not convinced that it is essential that the Chairman of the Board has oil in his veins - desirable perhaps yes, but critical no, as there are many other attributes a chairman must have which are of equal, or of more, importance IMHO. I think one of his main initial tasks, in addition to rejigging the strategic direction of the company, is to convince himself, and his fellow co-Execs, that they have the right CEO, and to replace him if there is any concern. It is with the CEO that the criticality of experience in the oil/gas business lies - also IMHO.

I love it from Albert Manifold “My focus from day one will be to help bp create compelling and sustainable value for shareholders.” How often to you hear that from a Board Director? Bodes well.

In my view too few BoD directors these days don’t seem to realise that their primary purpose - in my view only purpose - is to look after the interests of the owners, the shareholders. This is after all why BoDs were set up originally when there were too many shareholders for them to effectively supervise company management themselves.

That is not to say BoDs should not take into account matters such as ESG, employees interests etc. but these should be managed because it is in the interests of shareholders that they do so. So for every role they perform it should, in my view, be added - because it is in the interest of the shareholders that this is done. That is what I call “focus”.

I blame the Companies Act for the unfocused role of BoDs with is wishy washy description of the role of the BoDs where the interests of shareholders are mentioned in fine print as also rans.

Rant over

Guitarsolo. What I understand is that prior to FY24 they increased their capital spend on shareholders (their dividend pot) by 5%pa with no buybacks. Now they wish to increase their capital spend on shareholders by more than 5%pa, but with a combination of shares (albeit at a lower rate of increase) and buybacks. To me this means they will be increasing their rate of capital spend on shareholders, and not decreasing it order to preserve funds to invest internally. If they spend capital on dividends or buybacks/cancellations they will no longer have it.

As the proposed dividend increase is on a per share basis, I agree that the dividend pot will decrease as the share buybacks increase. But, to me, one needs to look at the sum of dividend pot plus the cost of share-buybacks to get the overall picture of their capital return to shareholders.

Whether share buybacks are beneficial to shareholders is another matter.

“In order to return more capital to shareholders over 2024 to 2027 instead of the equivalent of maintaining the 5% per annum growth in dividends per share.”

If this is implemented then, surely, rather than increasing the dividend by 5% pa, they will be giving back more than that increase in a combination of dividends and cancelled share buybacks which, combined, increases the return of capital to the shareholders.

In that case surely this does not hold “what it does do is give LGEN more funds to grow the wealth and PRT businesses (in particular).” Both dividends and share buybacks/cancellations cost the company capital, reducing funds more IMHO.

Oops you’re right Fj99 - brain fog!

Don’t expect to get rich with the interim dividend which will be about 6p plus 2% = 6.072p. The yield of the interim dividend on current the SP is therefore ca 2.45%.

Getafgrip - I agree with you about the reasoning behind BP holding treasury shares in excess of those required to reward staff, I am also am pretty sure the BoD will be bolstering their defences against a t/o using all means at their disposal.

We will see if a t/o eventuates, but I don’t think this will be from SHEL.

I came across this article by SAXO on why companies may wish to hold treasury shares and it covers the points you make. Maybe of interest.https://www.home.saxo/en-gb/learn/guides/equities/treasury-stock-explained-why-companies-buy-back-their-own-shares

“Could you kindly explain what benefit I, as a BP shareholder, would receive if the shares were cancelled rather than being held in treasury?”

An interesting and important question I have been pondering for a while now. But to recap, treasury shares have no voting or dividend rights, and cannot be included in EPS calculations.

My initial musings have led me to the conclusion there is little difference fundamentally from a shareholder point of view if bought back shares are held in treasury or cancelled, but it manifests itself in quite a different way.

If treasury shares are bought and held, no value is given back to the shareholders, so the intrinsic value of the company will not not change (as treasury shares have a value), and the total number of shares also remains unchanged so, so too, will the intrinsic value per share (which includes treasury shares). There would be no immediate effect on the SP, but it would be expected to rise as the company generates cash as there are fewer shares entitled to this cash.

If treasury shares are cancelled, value is transferred to the shareholders, so the intrinsic value of the company will fall, but the shareholders will own more of the lower valued company. The intrinsic value per share too, will remain constant until the company again accumulates cash.

In both cases the SP, initially unaffected, will rise as the company generates cash in the future, and in both cases the dividend per outstanding share will rise if the total dividend pot for distribution remains the same.

Seems to me to be a case of two to one, half a dozen of another when looking at the fundamentals. With treasury shares the company maintains control over their finances, with cancellations they lose control.

So to answer the question what benefit to a shareholder of cancellation? Certainly a greater ownership of the company with all the benefits that brings. And perhaps a more disciplined company as it seems to me when shares are held in treasury they can be treated as sweets for handing out with abandon. But, otherwise, I remain uncertain.

Anyway those are my initial musings and conclusions. A complex matter so I expect others may see things from another perspective.

Meoryou

Now that BP (and Shell) are returning to their routes as oil and gas companies rather than not energy companies, I would expect performance to improve and speak for itself. I don’t believe long term BP needs to be taken over to deliver shareholder value - just a focus on their core oil and gas business where they have expertise.

Having said that, I believe we are heading for a major disaster in regarding climate change. But the likes of BP and SHEL should, in my mind opinion, stick to what they do best, and that is oil and gas. The wealth generated can be used to allow others to manage the transition to a greener world. I play my part in this by reinvest the dividends from these two companies in “green” technologies and companies.

“As one poster said put the dividends in growth shares”

Buffett made his fortune by investing the “float” of his insurance businesses in different companies to extremely good effect. So copying the master and investing LGEN’s dividend elsewhere seems a sound idea to me.

By “float” I mean the cash generated from insurance premiums when the liability associated could be a long time ahead.

Getafgrip - on a point of clarification my understanding SHEL issued a Statement, not a RNS, on 26/6 regarding their intentions on a possible t/o offer for BP. It was BP, I believe, who issued a RNS on the matter copying the Statement of SHEL.

Not that that matters. What matters is SHEL’s intentions on the subject. In my experience SHEL plays these matters with a straight bat. As such I read the Statement at face value and don’t expect too many surprises. But this is an opinion, not a fact, so we will see how it pans out.

“This dividend needs rebased around 3.5-4%, thus growth will commence.”

Yes, if the company retains cash (capital) by not paying dividends or cancelling bought back shares, it could use this cash to grow the business.

But how with insurance companies? More customers? Higher premiums? Investing the “float” better? Cobble up smaller competitors?

I think the possibilities for growth of insurance companies limited, so , for this reason, they pay out a high proportion of their free cash. After all they do not seem to be any better in investing the “ float” than the market as a whole.

Bonuses have to be paid one way or another even if, like me, they’ve seem, to be excessive and/or they don’t reward the right behaviour and lead to a good shareholder outcome.

We, the shareholders, pay for these bonuses one way or another either through cash, share issues or treasury shares and their many modifications like options. The cost of the first two are tax deductible for the company like any other cost, and accounted for on the profit and loss statement. Treasury shares are purchased using post profit cash and so are not directly tax deductible on the profit and loss statement. So I don’t know the tax treatment of treasury share handouts. Does anyone know if , or indeed how, there is a tax break for the company if treasury shares are used to reward management?

‘How would the good folk here have bought into the company if it were not up for sale?”

I tend to buy shares in a company based on its current performance and future potential to grow. With a philosophy of buy and hold for the long term hold, I have never bought a share on the basis that it may be taken over. In the right hands BP can be turned around IMHO, and, for this reason, I maintain a modest holding when compared with my holding in SHELL. It won’t be easy, but it can be done.

Speculators will see things differently.

I would guess that SHEL will keep monitoring the attractiveness of otherwise of a t/o of BP, but I think the probability of a bid after the 6months is low. If another company makes an offer in the interim, they may look at this from a different angle, looking ah how this could affect their competitive position.

I also think they did the correct thing to dampen media speculation about a bid and fully focus management attention on implementing their own well conceived and clear strategy. Handling a takeover bid would be an unwanted distraction from my point of view as a SHEL shareholder.

I share the sentient of SLove as I don’t like takeovers of companies I co-own after spending a lot of effort researching the fundamentals of these companies and assuring myself of their quality.

If I knew what to do with the funds I would sell now and reinvest. The trouble is most of the high quality companies I have researched are on high valuations so the present is not a good time to reinvest.

So I’ll hang on - if a higher offer comes in well and good, if not, no matter as I will sell if another opportunity arises. Otherwise I’ll wait to get paid out

Good point jaffjoon - also quiet on ADVFN.

Seems to me there are many excellent companies not attracting much comment. HALMA, a very successful company over the long term, is another notable example. Maybe old tech companies are just too boring to be of interest

She is up - at last - but a sorry sight.