The latest Investing Matters Podcast episode featuring financial educator and author Jared Dillian has been released. Listen here.
Quote from WSJ
"Mr. Looney has said he is disappointed in the returns from some of the oil giant’s renewable investments and plans to pursue a narrower green-energy strategy, according to people familiar with the discussions. He has told some of the people that BP needs to do more to convince shareholders of its strategy to maximize profit in areas where it has a competitive advantage, including its legacy oil-and-gas operations.
He and other BP executives have suggested the company could play down future investment in areas including solar energy and offshore wind, according to some of the people."
Harmonica, I am against a windfall tax...but this is going to continue every quarter for the next 2 years...very loudly., it's unfair and as I said it's a form of legalised theft....but my point is the sums we are talking about are low and won't be a big hit for us. Occurs to me that once it's paid that will be it and the public will realise that it's not the panacea that Labour are touting.. If the Tories don't do it great, but be prepared for non stop propaganda against the oil companies that actually could end up with much worse consequences a few years down the line.
Reported today that the proposed windfall tax would cost BP £250 million. This is very manageable , and even though it is in my opinion theft, a reduction to the constant demonising of BP and Shell would be worth it. As long as it is a one off, and precedent supports this, then we can focus again on increasing shareholders returns with less scrutiny.
I see it like this....if price is 400, then after 100p capital return, price will open at 300p. There will then be share consolidation 3 for 4. This will give each share a 400p value again. Everyone will own same % of company but company market value will drop by that 100p per share payout(3.75B). If you buy back shares with your payout then you will increase your number of shares back to what you originally had but own a larger % of remaining company.
I was always under the impression that long term we will have to find revenue from renewables to replace the lost oil and gas revenues due to 40% volume reduction (from 2000 levels). Well they clarified in the call that revenue will actually be roughly the same in 2030 due to better margins. Solar and wind will actually only be a relatively small part of the business in 2030 but contribute to additional steady income nonetheless....big growth areas are biofuels and convenience. Very happy to hear this as I was always concerned how low margin renewables would make up the gap.
I think this is what BP will do, Shell CEO indicated as such that shares are undervalued and once they reach fair value then dividends will increase. Personally I think dividends should increase now as I worry if not there will not be much more price appreciation as BP/Shell offer similar yield now to ultra defensive stocks. I guess the buybacks will help, but being a pre pandemic holder I'm getting a little impatient waiting to get some of that 50% dividend cut back.
I disagree, I think its time to reward shareholders, debt is under control and the dividend should be increased close to pre pandemic levels. The current dividend strategy is based on $60 oil, this I believe will be revised this quarter. We shouldn't be afraid of negative press, we suffered as long term holders terribly during the pandemic, now we have recovered like many businesses. The press will negatively report on profits and shareholder returns whatever happens. The worst that could occur? A windfall tax that is very unlikely but even if it does happen, it's most likely a one off on North Sea profits...not a huge loss for BP.