I have created this thread as a distinct place to discuss the merits (or otherwise) of the investment case for BP, in the light of the oil spill, so that the Transocean semi fire thread can be kept "purer" for discussion of technical matters relating to the accident.
This thread can be used for reporting news and discussion relating to BP (LON:BP.) as an investment.
My own basis for investing in BP during the crisis is that I did not feel it likely that the dividend would be severely impacted. Not for the first time, some analysts are suggesting that the dividend COULD be under threat today. Clearly there is a risk but the numbers do not currenty suggest to me that it is excessively high. A reasonably conservative view is that the total cost of this crisis: well repair, spill clean up, compensation, penalties etc could be in the $20-$30bn range - spread over, maybe, 5 years. That is the sort of figure that BP could absorb without a huge financial impact, given its cashflow.
Of course, there is a risk/probability that BP's US operations & revenue generation in the future could also be impacted... but if so, this could impact the earnings of other operators who also will have to bear higher regulatory/insurance costs. The end result could easily be a higher oil price which would counterbalance the cost impact.
Disclaimer:
The author may hold shares in this company, all opinions are his own and you should check any statements that appear factual and not rely on them before making an investment decision. The author is NOT a qualified analyst nor authorised to give investment advice. Whilst the author is a director of ShareSoc, all views expressed are entirely his own and not necessarily those of ShareSoc.
BP p.l.c. (BP) is an integrated oil and gas company. The Company provides its customers with fuel for transportation, energy for heat and light, lubricants and the petrochemicals products used to make everyday items as diverse as paints, clothes and packaging. It operates in two business segments: Exploration and Production, and Refining and Marketing. Its Exploration and Production segment is responsible for its activities in oil and natural gas exploration, field development and production; midstream transportation, storage and processing, and the marketing and trading of natural gas, including liquefied natural gas, together with power and natural gas liquids. Its Refining and Marketing segment is responsible for the refining, manufacturing, marketing, transportation, and supply and trading of crude oil, petroleum, petrochemicals products and related services to wholesale and retail customers. The segment comprises three main businesses: fuels, lubricants and petrochemicals. more »
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And US officials disagreeing on how much oi lis still out there:
http://www.guardian.co.uk/environment/2010/aug/19/bp-oil-spill-scientist-retracts-assurances
White House claims that the worst of the .
HI back again with some technical thougts after I noticed the price had dipped again and I was trying to see whether some set-back had occured or whether it's just general market sentiment.
Interesting that as far as I can see the the static kill has been succesful plus a concrete plug. This leaves the annulus as a potential leak point. So I think it is highly likely they will drill into the annulus with the relief well and kill that.
It's less clear wehther they will really need to drill into the casing as this will probably already be full of concrete from the sttaic kill but I suppose they may do so just to be certain.
Either way it looks to me very unlikely that there will be a major problem with permanently killing the well to the government's satisfaction. Although I can't quite see how far they have got with trying to replace the BOP which I suppose may be spooking the market as well as weaker PoO and economic worries.
B.
Bought some today at 3.70 for a flutter
yes I bought a few more* yesterday = a tad too soon but I'm very confident yhat in a year's time they'll have paid out handsomely.
never thought I'd say this but BP is now my largest holding
The company did not reveal what assets it intends to shed, beyond the package of U.S., Canadian and Egyptian properties sold to Apache Corp. for $7-billion (U.S.) earlier this month and operations in Pakistan and Vietnam that had been previously put on the block. BP said its production would drop by about 10 per cent from four million barrels per day once the sales are completed.
Analysts expect the company to attempt to sell its controlling interest in Alaska’s Prudhoe Bay production and pipeline system, which could fetch as much as $12-billion. Also likely to be put up for sale are BP’s stake in Argentina’s Pan American Energy, worth up to $9-billion, and Vietnam’s Nam Con Son gas project, valued at $1-billion, as well as other, smaller assets.
Meanwhile, speculation in Europe is ripe over what assets BP might sell in Europe.
German business weekly Wirtschaftswoche last week cited unidentified investment bankers as saying that BP plans to sell its Aral chain of gas stations. BP owns 2,500 Aral gas stations in Germany that are estimated to be worth around $2.6 billion. The weekly said possible buyers include France's Total, European gas station company Avia and Russia's oil company Rosneft, although the latter has already denied being interested.
BP representatives have in the past days denied that the downstream sector would be affected by sales.
I wonder if there are any upstream interests in Europe that might go on the block?
Elsewhere, not much in the way of news, as far as I can see, though I gather there is some interest in the Pakistani upstream assets - quite attractive in financial terms for any company that's prepared to take on the political risk...
Worth keeping an eye open.
Although I can't say, like Tournesol (preceding post) that BP is now my largest holding, I do now have one, and far from being my smallest E & P holding. One I expect to hold for some time to come.
Man Siarad
In reply to ManSiarad, post #549
Yes "back" to the crisis play.
I don't think its possible to really know the financial position of BP at the moment - due to unkown effects of sales of BP's businesses and its spill liabilities. Investors will just have to hope that BP can survive - looks likely I'd agree.
It is concerning that BP is still raising cash through sales even though it has suspended its divi and has a significant cash flow.
In the short(ish) term the likely mover of the SP will be the final kill of the well and standing down of much of the army of spill workers and equipment, I think.
This should happen over the next 2 - 3 weeks.
Longer term it still seems much less obvious to me how things will pan-out and I'd be surprised to see the SP anywhere near its highs for a long time, perhaps never.
B.
I'd concur with not knowing the financial position - I'd personally hope that, in addition to the major sales of non core assets, these small asset sales(such as the German businesses announced ) are part of a general tidying up exercise and a refocusing of BP.
Only time will tell but I personally believe that, once the well is killed, and both the total liabilities and their apportionment to other parties is known, that BP's significant firepower,and resumption of dividends will lead to a significant revival in its share price. Underpinning this is the continued bid speculation should it fall back to sub 350.
Doesn't the continuing drip drip drip of asset sales/disposals help to clarify the value of the co on a sum-of-the-parts basis? Doesn't it emphaise just how much the co's assets are actually worth on the open market as opposed to the current market cap which IMHO owes more to sentiment and fear than it does to a realistic assessment of value.
In reply to bugsmunny, post #550
Longer term it still seems much less obvious to me how things will pan-out and I'd be surprised to see the SP anywhere near its highs for a long time, perhaps never.
That's a very brave comment - suspect you'll be wrong.
Isn't the main issue with BP now primarily one of where the growth will come from?
Obviously asset disposals will continue until they feel they have a comfortable cash position to deal with expected evntualities - but where is the growth going to be?
There is a difference between investing in an integrated oil company that has a clear strategy for growing shareholder value and investing in a temporily undervalued utility........and it seems to me that BP is now more of the latter than the former.
And, if that is so, shouldn't a quasi-utility trade at a discount to where the former growth-oriented company would trade?
Reports of a rig on fire in the Gulf of Mexico following an explosion, belonging to Mariner Energy.
http://www.nytimes.com/2010/09/03/us/03rig.html?partner=rss&emc=rss
This won't help the cause for lifting the drilling moratorium.
SM
Nobody died and no oil leaked though thank goodness.
Log
Nigelpm,
yes I suppose it's a blunt guess regarding the SP but as others have perhaps more eloquently pointed out it is concerning where future growth comes from. You can't just suck out a year or two's worth of income and expect the SP just to pop back to where it was.
Tournesol,
In theory maybe but most organisations are more than a sum of their parts if they are working properly and if you suddenly sell off bits under duress it doesn't seem obvious how the group as whole copes. At a very minimum other investments and projects will be stalled.
I'd be interested to see what you value the rest of the business as on that basis
Crisis play,
Ideally a crisis play takes advantage of the market fear and over reaction, so once a significant recovery in SP occurs should you continue holding? Not so clear.
The prime mover here was the explosion and leak, once that is finally controlled to US government's satisfaction I expect the SP to find a new level which reflects that, a little higher than here. A finger in the air - around 420-460p
http://uk.news.yahoo.com/18/20100903/tbs-bp-oil-spill-costs-surge-to-8-bln-8cc5291.html
Bugs
I haven't attempted a SOTP valuation myself (yet). My belief however is that the market over-reacted into the blow-out, that many people indulged in panic selling and that the price fell far more than was warranted by the facts at that time. Seems to me that the facts emerging now suggest that the impact of the disaster will be far smaller than many of the views expressed over the past few months. I'd hazard a guess everything else being equal, the SP will recover to 500p in the near future. (12 months or so)
The point I was making about asset sales is that it looks as if BP is achieving sales prices which are considerably higher than the casual estimates of outside commentators. Which suggest to me that regardless of the sources of future growth the assets of the co are probably worth more than its enterprise value as it was pre-disaster. Which should support the SP recovery.
But its only my opinion supported by little in the way of detailed research.
T
Tournesol - I take your point. I don't actually think your and my opinion is that different. I posted at around 300p saying it was likely to be seriously oversold at that point and the well was about to be capped.
Considering that the pre-disaster SP was around 650p - a recovery to 450p or 500p is not exactly spectacular for those original holders but for those who bought in a 50% proft in 6 months would be very nice.
In summary I imagine a rise from 350 to 450 is likely to be a lot more rapid and probable than a rise from 450 to 550 and then from 550 to 650p.
B.
These negative recs are fun - I think I'm going to give one to everybody just for bothering to post.
In reply to bugsmunny, post #560
"...These negative recs are fun - I think I'm going to give one to everybody just for bothering to post..."
not me Bugs, honest
I'm finding I get one negative vote every time I write. presumably its the same person each time (as for you?) and obvioulsy he/she really doesn;t want to be my friend. Its very sad, but I'll survive
T
The point I was making about asset sales is that it looks as if BP is achieving sales prices which are considerably higher than the casual estimates of outside commentators
Trouble is that in these situations companies usually sell their most undervalued assets first because it forces up the value of the remaining ones and looks good and so boosts their share price (based around what you have written). They are usualy the quick and easy ones to sell fast (as they are in demand). It wouldn't look good if they started off with a sale below book value which was hard to shift!
All that said plenty off asset backing.
In reply to tournesol, post #561
I know the feeling Tourn. I seem to get one negative vote every time I write as well, even it seems, for posting news relating to a specific company that i happen to be following.
Unlike some however,who I suspect see it as some form of repetitive cyber bullying, I'm fairly thick skinned so don't pay them any attention..again I'm presuming that it is the same person too for the majority.
In reply to bugsmunny, post #557
Nigelpm,
yes I suppose it's a blunt guess regarding the SP but as others have perhaps more eloquently pointed out it is concerning where future growth comes from. You can't just suck out a year or two's worth of income and expect the SP just to pop back to where it was.
That makes the assumption that the price was right at £6.50!
In reply to Fangorn, post #563
I can't for the life of me see the point of showing negative recs.
There isn't a human being on the planet who doesn't get a tad upset at someone openly being negative at a comment they make no matter how well argued the case they make.I know people say they're thick skinned and all that but...
Its actually bad for discussion and and bad for the notion that an alternative case if well thought out and presented can be presented without the prospect of being summarily trashed by others.
The real problem is that nobody can quite agree what the basis should be of a negative rec.
As long as that's the case why not ditch it (as iii has done this quite recently).
In all honesty what does it add or more to the point what does it take away.?