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I agree with those figures and comments meoryou. But $92 WTI oil over Q4 could be enough to stop inflation figures falling as the economy deteriorates.
There is also the risk of a spike if everyone panics at oil stocks falling. I think China is pretty well stocked (bought all the SPR from Biden LOL) so they could sell down if they don't like the price going over $95.
$90 oil with high refining margins is lovely for BP. The more shares they buy back before Q3 results the better.
I think BP were very long futures contracts at the end of Q2 so any lack of prior performance should be added onto Q3. I am hoping for very good results as the increase in oil price took off from 1st July.
The down side of high oil prices is higher inflation so I don't see "light at the end of what will prove a long tunnel", I expect the high oil prices will sharpen the move into recession at the end of this year.
My plan is to be extra long BP at Q3 results and then reduce before recession takes hold. Obviously it is easy saying this but timing and predicting the future is impossible.
The point here is by doing this they avoid the restrictions set out in the agreements.
A couple of weeks ago we had this
https://www.theguardian.com/business/2023/jul/20/giant-windfarm-norfolk-coast-halted-spiralling-costs-vatttenfall
It's not profitable because of the price cap the UK put into the contract.
BP think their USP is they can cross sell/use the energy within their company (hydrogen production?), they also seem to think energy prices are going to be higher in the future. They also think they can add value to the green gas company they bought in the US through integration (I guess they think it fits in nicely with their energy trading so they can charge more by better marketing).
Best thing to do is email tabys@tabysapp.kz
They are pretty good. For me, I couldn't get the text message with the access code so they routed it through an EU provider.
Thinking further, I believe the long-promised underlying cashflow will be coming through in Q3 and Q4 plus the unwinding of the previous Muddy Waters/accounting worries.
If people look for a possible trigger when in value investing, BUR currently has 2.2 of them
Cashflow increase
YPF
Official accounting standards and quarterly reporting
All due over the next year.
Only the recession and stock market crash will get in the way :D
My thoughts
Argentina have taken this too far for Burford to accept a 50% haircut. They are at the end of the road and due to the huge value of the claim, they can't afford to keep letting the interest accumulate.
It's also hard to imagine they can just leave this judgement outstanding as they will have permanent impairment in their ability to transact normally in the world. This could be magnified in the O&G sector where the claim originated which also happens to be an area Argentina has great expectations for.
Argentina can't post the bond for the appeal without the IMF funding it so I believe the payoff will be negotiated H1 24 in conjunction with the IMF and the new government.
$15bn judgement, $12bn paid H1 24. The reduction being 'goodwill' negotiated with the IMF.
I am sure the law governing the IMF is complicated and specialised but it makes a farce of this court order if the IMF can hand Argentina billions of dollars whilst the money is outstanding in the US court judgement.
I hope it's obvious I was not saying that they only need half the wells now. I just meant they need a few less wells and the ones drilling have a lower fall off rate.
I do believe they have used all the best DUC's, the number of uncompleted wells is falling much more slowly now
https://www.eia.gov/petroleum/drilling/
So they are now having to do the work to get wells drilled and investors still want a good return (so are unlikely to throw cash at the problem).
Add all this together and you end up with shale production levelling off, we first hit the current US Field production number of 12,200 in August 2022 and again in December 2022 (so YOY is now flat).
There was a peak in June 2022 of 12,400. If we are now in a decline I think it will take a lot of people off guard.
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCRFPUS2&f=W
These figures are estimates, you have to wait for the monthly lagging figures to back them up. These peaked in March 12,770 and then fell slightly in April and May.
https://www.eia.gov/petroleum/production/
Sorry this post has ended up a bit full of figures but I was just going through it all myself. It helps get your thinking straight if you write it for other people.
Also the efficiency and technical ability of drilling has increased hugely since 2020. This means less wells are needed.
For example (and I am not 100% sure of this), they can drill further horizontally so you only need X rigs in an area rather than 2X.
This is all lining up nicely, I am expecting good results from Q3.
The reason trading results were bad in Q2 should have been the net long positions BP were holding to take advantage of this unwind in the paper market. The advantage BP has is they can trade the product with in depth knowledge of delivery demand. Buy in Q2 for low prices and sell in Q3 for $90 per barrel.
Unless they fix the windfall tax problem there won't be anyone bidding on the licences. I wonder what negotiations will go on in the background so the auctions are successful.
It's either that or a public change of policy which will upset the climate lobby.
Mark you did confuse me, more so since the IEA do release reports but shouldn't be confused with the EIA or the API
:D
EIA inventories are normally 3:30pm UK time on Wednesdays. Very confusing oil price slumped today despite the huge inventory draws reported last night (API) and today (EIA).
I love the optimism but we now have a month gap where there is unlikely to be any news. If I am going to buy more I will be patient.
Hopefully the results will show there is a good underlying business and then we will have news on YPF before the year end which will result in a further boost.
The share price fall seems to be more correlated to the US market opening rather than the POO. The rise in the UK was odd.
There is mush more liquidity in the US market, the UK needs to modernise the rules and taxes to lower friction in transactions here. Otherwise the LSE is going to die.
I am with MarkGo on this one, the results missed and share price has moved the opposite. (I positioned myself for a short term fall in share price by selling some 36.5 and 37.5 August calls but didn't sell my long position).
"weak oil trading result"
I was correct on my oil trading result prediction and if it's because BP had bought into all the shorting that happened H1, they will already have profited in the start of Q3. Let's hope the oil price rise continues to $90.
Looks to me investors have liked the divi increase so this could be a private investor lead reaction. We will see what happens over the next few days.
I am not expecting great results, my guess stems from the trading conditions being difficult to navigate for their trading department rather than the known drop in O&G earnings.
"pull back on reporting what will definitely still be okay results"
That was sooo last qtr, hopefully not to be repeated this time.
The great thing with the "buybacks behind the curve" plan is the goal posts constantly move.
14% of shares have been bought back since 2019 so the current share price of 476p is the equivalent of 409p.
Even if the share price made it to 550p it would still be 14% undervalued compared to the average price in 2019.
The current share price would have to rise 34% for the company to be valued the same as in 2019, the higher this percentage the faster the buybacks will work feeding back into increasing the percentage further.
(BP have also reduced debt so you could argue the current discount is even greater).
I know this is a personal circumstances choice but I would like BP to not increase dividends, and increase buybacks for as long as the discount is high (even if debt rises slightly).
I have been positive the last couple of results days, but this time I am negative. The reason being the oil price defied supply/demand behaviour all the way up to the end of the qtr.
My theory is the trading department will have done 'badly' in q2 and will do better in q3.
If trading does well in Q2 they are geniuses but in that case I hope they jumped onto the other side of the boat on 1st July.
I thought this nicely reflected the views of where we are
"Inventories in oil are drawing, Chinese demand is back to 15.9 million barrels per day, time spreads are tightening—all indications of a bull structure," Currie said on Tuesday.
https://oilprice.com/Latest-Energy-News/World-News/Goldman-Sachs-Currie-Oils-Rally-Is-Unloved.html
I am not surprised at the Russia news, I thought their supply would drop at some point but I don't think it's voluntary as they say.
Either they have fatigued their reservoirs by draining as much supply as possible over the last year or supply is falling due to lack of maintenance equipment and knowhow (BP exit?); most likely a mixture of both.
Oil futures prices are falling because market participants are convinced there is going to be a big recession and demand will fall even further than the current supply gap. Things like this never happen as quickly as you think so I think there will be a short squeeze in the middle before demand really falls off.
I will have a go - They affect the share price instantly but the value difference is not enough to noticeably move the share price. Only over longer periods of time can you see the effect and only if the buybacks are big enough as you say.
4% in H1 is substantial so that would qualify in my mind.
It will affect the balance between buyers and sellers that create the marketplace but how this affects price is impossible to know. You will end up with questions like "if BP was not buying shares would the newly ESG pension fund selling have pushed down the share price?".
What is indisputable is that if there are 25% less shares in circulation in 2025 than there were in 2020 the earnings per share are 33% more than they would have been. I like this maths and I prefer buybacks to dividends currently (as it helps me increase my ownership of the company without doing anything).
If I thought the shares were over-valued I would not be for buybacks... but then I wouldn't get dividends either as I would sell my holding.