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Even if there is some liquidity issue with the pension funds, the increase in rates should have helped the long term funding position of the pension scheme significantly. It might accelerate a buyout.
There's a big table in note 7 of their year end accounts that breaks down the assets held. They have a tiny amount of LDI's but a huge amount in "total return products" which sound suspiciously like LDI's by another name.
And on a side note, these things don't seem to generate any returns. I don't understand why pension funds do all this complicated stuff instead of a sensible mix of government bonds, highly rated corporate bonds, and equities, which would generate a much better return in the long run, and surely it's the long run that matters for a pension fund.
I wonder if the recent LDI pension fuss is going to have some impact on the pension schemes here.
In terms of unhedged commodity revenue it's 8.6% oil for H1 2022.
You can see numbers on page 47 of the latest presentation:
https://d1io3yog0oux5.cloudfront.net/_96e8ab32b6a34c634f8c7c31bcfec33b/dgoc/db/557/4588/pdf/DEC_Corporate_Presentation_August_2022.pdf
ArK87, I would say the latter, and I hope no more money is spent on it.
Yes, that's right. It's easier to value this kind of company on cash flows rather than profit.
It's all very complicated and confusing, but I don't think it's LGEN who had to make the margin call, it's the pension funds who had to make margin calls with LGEN. Unless LGEN are justa middleman and then have to make their own margin call with a big investment bank, but I haven't heard anything like that? Seems to me there's some counterparty risk there at the minimum (what if the pension funds go bust?) but there could be more risk as well that we don't know about.
I really hope the company comments next week. If there's no material impact and everything is OK then say that.
I don't think anyone outside the company knows the exposure, they haven't commented yet.
The worrying thing would be if nobody inside the company knows the exposure either. Some of the stories from 2008 are along those lines, some big banks and insurers had management teams who had no idea what their bond traders were doing.
Wouldn't it be ironic if the pension funds that are being forced to liquidate other assets to put up collateral for LDI's are selling LGEN shares to fund it.
Thanks also/
Montecristo, do you have a link to the article pleasE?
Still think they should be updating the market, even if things have settled down now. We really could do with knowing their exposure to future shocks of this nature.
They really should update market.
Has the company commented on this lawsuit?
https://www.sierraclub.org/articles/2022/07/new-lawsuit-targets-fraudulent-transfer-oil-and-gas-wells-evade-cleanup-obligations
It's blue! It's red! It's blue again!
Who cares? It's an income stock.
cunningfox, from the RNSs on 2.8.21 and 1.8.22:
As at 30 July 2021, the issued share capital of BP p.l.c. comprised 20,239,765,576 ordinary shares
As at 29 July 2022, the issued share capital of BP p.l.c. comprised 19,036,485,438 ordinary shares
That's a reduction of over a billion shares, or about 5%.
Rivaldo,
I'm not ignoring the building. It's an integral part of the business they've just acquired as a whole for £4.2m. You can't just strip it out.
Yes, you could do a sale and leaseback, but that would hurt profits. So, lets assume a 5% yield on the property value (generous imo) of £1.65m = £82k deducted from the EBIT of £383k reported in their 2021 accounts = £301k. £2.65m acquisition cost divided by £301k is a price/EBIT of 8.8, which again looks expensive compared to historic multiples.
I trust management here, they have a great track record, so when they say they'll be able to reduce costs and grow the business I believe them. I'm not saying it's a bad acquisition, I'm just saying that it's expensive.
Why would you exclude the freehold property? If I'm judging the company on its return on capital, the property forms part of the capital employed.
Looks a bit on the expensive side compared to usual prices.
I don't see why they can't put the dividend up at least in line with the reduction in share count. Anything less than that is a cut in the cash amount they're paying out which seems silly given the amount of money they're making.