The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
Charlie, before we talk board seat I need to beat the slow-progress large corporate view that someone at 30 couldn't possibly make the step to senior manager :D... One of the things keeping me here is the considerable bonus's over the last 3 years which is stuffing my pension relatively early doors in my career
Jakers, you are correct - but they are going about reinstating the divi to previous levels the slow way, reduce sharecount and overall expensive of a 10% divi yield... take us a while but we'll get there
Who knows Jakers, I'm sure we track sector averages or there would be shareholder revolt with the SP not performing.
meoryou, interestingly (or more worryingly) I own more bp shares than 6 of the board members - not sure why they have to sign-off strategy if a lowly young mgr has more exposure to the company than they do!
The thing to remember at these times is that fundamentals always win out in the end (also you're not smarter than the market) - we've delivered a 16% reduction in share count since Q1 2021 and guided for a further 14% of buybacks in the next 2 years.
It's a slog, but a 20-30% rerate is what we are all waiting for, before you take into account bottom line growth. In the meantime pick up the divi, watch our cash balance grow ($33bn now!) and our debt to move around but ultimately decrease.
You also have to remember this is an O&G stock, very rare to see rapid 20% swings... it typically takes a large world event or change in strategy to move these beasts.
Looks like 480p is holding, prior to any buybacks starting and on the run up to ex divi date. Lets hope it holds past the 15th and oil market tightness continues. POO steady at $80ish range, with a little good luck lets hope we bump up to £5 and anchor there next
Think Murray and Kate were a little nervous at first, it's a big step-up from CFO -> CEO and into the c-suite. I certainly wouldn't want to do it.
They found their feet on the analyst questions and thought Kate provided a very strong performance. Knew the figures and the business inside and out, even when challenged on working capital questions from 2020 and took a production question on bpx which a CFO wouldnt usually do. You can see why she got the nod.
Not sure if they've made a rod for their own back with given an exact $16bn cap. ex. figure. Analysts seems to like the simpler financial guidance to 2025 however.
Encouraging, but think Murray will have to come forward with more detail on how we will 'simplify' and that will be his first test on getting messages landed as CEO
I like:
- Operationally strong, despite weak trading performance due to market tightness and low refining margins
- Promised $14bn buybacks before end 25
- Cash now at $33bn
- Debt down and will likely continue to fall at this POO
I dont like
- No divi uplift in quarter, 10% for year but hurts total shareholder returns vs. peers
- board seems to be anti dividend, could hurt the stock in the long term
All in all, mr market seems to like it - wouldnt say this is the swing we need as I'll need to see us move on from this point over the next quarter but very strong performance overall, considering exec co changes
will post again after earnings call
Just looked and at the end of Q3 we have $30bn in cash and equivs on the balance sheet and we're at a market cap of $100bn. So deducting our cash position, the market values our assets and future cash flows at $70bn ($55bn), and we're probably on target for c: $30bn RCOP this year?
SP maths isn't mathing.
Heres my thoughts ahead of Tuesday!
Forget the results, for the most part i think its a non event as i anticipate they'll be comparable to Q2, only things I'm watching out for is gas trading performance and marketing results after a tight q3. The interesting part will be Q&A - expect the analysts to push further on recent wind actions, buybacks over the next year and any potential changes to the financial frame. Think Murray can kick himself off to a stormer if he can reset the narrative on wind and keep reinforcing the core is chugging along, in the calm consistent manner he displays.
The fact our PE trails BAT is literally comical, the value gap to shell has to start closing shortly or we get eaten up. There's only so long we can be cheap for before the biggest of boys start circling. ... You'll notice my attitude is changing on this as reports of limited oil price movement for 2024 come in, no one gets acquired in a volatile environment.
Also its strange they haven't announced the new CFO, when they said they would prior to FY results.
Wouldnt worry about shell borrowing to maintain buyback/divi rate. Its a matter of priorities and onwards projection of spend in the business.
What does concern me about Shell is their inability to guide on buybacks - this indicates they dont have a handle on future financial commitments or planned spend - at a time when the oil price is looking very stable at 75-85$. I'm not invested in shell
Just reviewed shells results - some thoughts
- Shell and bp strategies are aligning more and more - They've been much cleverer about it though, highlighting where they have new O&G production coming on board and only stating how much they allocated to renewables, not making it front and center of their comms
- Strong set of results, a 20% increase in divi this year piles the pressure on bp to do so the same. Largely self-funding due to amount of buybacks going on however.
- Pretty consistent QoQ performance from them, think they've been helped by higher than expected performance in downstream.
All in all, great set of results. however I don't believe they are undervalued whereas bp are - so this remains the value play for me.
Like all hacks he's missed the detail, instead opting for vaguery around bp not putting their money where there mouth is on renewables, A north sea driller moving to install EV charge points etc, bp's only capability is the cash we have. I do wonder how these hacks get paid to write such drivel when its clear they haven't spent any decent time in an actual business that isn't typing words for ten mins then heading to the pub.
Fact is, due to the strategy it leaves us open to attack from both pro oil and pro renewables - we'll never be seen to be doing enough in either until the integrated returns flow through.
ignore and move on *yawn*
I only really read the FT now for decent journalism and this can be hit and miss at times, particularly around politics
Three weeks in 30c+ heat starkly contrasted to the 6am 10c bike into the office this morning.
Murray's announcement is an interesting one, continuity candidate for sure - I do feel he wont go loud and big in the first 6-9 months, but he'll eek out small changes over the next year. Can't see a further retrenchment in O&G reduction aims, but I anticipate he'll pivot our position on some of the more challenged renewables (wind). I think the SP will react positively, not on O&G production news, but more focused/disciplined capital allocation (he is a CFO at heart after all).
As for short term - think POO could run a little, risk premium isnt built in at all and middle east is hotting up. This will push us back to £5
FY results next week - headlines will say "profits slump", but think we'll see further proof that the business is generating a lot of capital at the current oil price which will flow through to continued buybacks and hopefully a >4% increase in dividend - which should push us through £5 again.
All in all, I remain bullish and interested to see what Murrays first big move will be
On the last day of my holidays, thought I’d check in as I wind down and remembered QoQ we are still accruing dividends from rosneft. Who knows what will happen to this cash but me think it’s not as straight forward as it just gets handed back to Russia