BP Plc - British Petroleum

[LowIQinvestor]

Yes, BP's case has always been that multiple parties were to blame.  Halliburton certainly doesn't look like they have clean hands.

 

I am averaging up in BP today.

 

It is about the only thing I can find that is still undervalued.

[LowIQinvestor]

Q2 earnings out:

 

http://www.bp.com/content/dam/bp/pdf/investors/bp_second_quarter_2013_results_presentation_slides.pdf

 

Con: Tax rate of 41% doesn't help near term earnings.

 

Con: Setting aside more $$ for legal claims ( $1.4B)

 

Pro: More than 50% growth in operating cash flow by

2014 at $100/bbl versus 2011

 

Pro : Stock is close to book value and yields 4.9%

 

Perhaps it will be a longer haul for shareholders than I originally thought. I'm not selling though.

 

 

 

[fareastwarriors]

Big Oil's Rodent Problem

 

http://online.wsj.com/article/SB10001424127887323997004578641952481046688.html?mod=WSJ_HOS_LeadStory

 

The term "Big Oil" usually conjures up images of colossal rigs operating in high seas or suits cutting deals in a grand game of oil and geopolitics.

 

How about giant hamsters?

 

This week's quarterly results from three of the biggest names in oil—Exxon Mobil, XOM -1.09%Royal Dutch Shell RDSA.LN -4.69%and BP BP.LN +0.87%—provided dismal confirmation that they are running furiously just to stand still. And they are falling down on the wheel.

 

...

[fareastwarriors]

http://www.businessweek.com/articles/2013-08-06/bps-oil-spill-settlement-is-engulfed-in-fraud#r=rss

 

BP's Oil-Spill Settlement Is Engulfed in Fraud

 

[fareastwarriors]

http://blogs.wsj.com/corporate-intelligence/2013/08/07/bps-new-move-in-battle-over-deepwater-horizon-damages/?mod=WSJBlog&mod=WSJ_corp_intel

 

 

BP’s New Move in Battle Over Deepwater Horizon Damages.

[LowIQinvestor]

Baupost added 1.5 million American Depository Receipts of London-based BP Plc (BP/) for a stake valued at $776 million

[fareastwarriors]

http://www.nytimes.com/2013/08/15/business/global/bp-sues-us-over-contract-suspensions.html?ref=business&_r=0

 

 

BP Sues U.S. Over Contract Suspensions

[CorpRaider]

Baupost added 1.5 million American Depository Receipts of London-based BP Plc (BP/) for a stake valued at $776 million

 

1.5 more?  What's that make 18 million plus?

[fareastwarriors]

18,597,482

 

:)

 

 

http://www.sec.gov/Archives/edgar/data/1061768/000114036113032160/xslForm13F_X01/form13fInfoTable.xml

[CorpRaider]

Starting to get into real money...hah.  Part of me wants to buy some BP, BCS and or RBS for several reasons, but chiefly so I can listen to all those accents and talk about "gearing" on the conference calls.

[LowIQinvestor]

BP is at or under book value today!

Plus you get 6% yield.

 

I agree with Klarman.

[CorpRaider]

I agree with you it is cheap, but the only reason I haven't bought any is because so are RDS and XOM and CVX, maybe not quite as cheap, but they're also not facing some of the same issues.

[kevin4u2]

I agree with you it is cheap, but the only reason I haven't bought any is because so are RDS and XOM and CVX, maybe not quite as cheap, but they're also not facing some of the same issues.

Attached is the reason why I won't buy oil producers.  I find it ironic that it was only a few years ago that the NG industry went through the shale gas revolution.  We all know what that did to the price of NG.  Now oil is undergoing the same transformation.  Shale oil is a paradigm shift and it is creating too much uncertainty about the price of oil going forward. 

 

http://www.aei-ideas.org/2013/08/us-oil-output-has-increased-2m-barrelsday-in-just-2-years-to-a-24-year-high-thats-like-adding-brazil-to-the-us-oil-supply/

[LowIQinvestor]

I'm on Munger's side when it comes to the price of oil:

 

"Oil is absolutely certain to become incredibly short in supply and very high priced. The imported oil is not your enemy, it's your friend. Every barrel that you use up that comes from somebody else is a barrel of your precious oil which you're going to need to feed your people and maintain your civilization. And what responsible people do with a Confucian ethos is suffer now to benefit themselves and their families and their countrymen later. The way to do that is to go very slow in producing domestic oil and not mind at all if we pay prices that look ruinous for foreign oil.

 

It's going to get way worse later ...

 

The oil in the ground that you're not producing is a national treasure ... It's not at all clear that there's any substitute [for hydrocarbons]. When the hydrocarbons are gone, I don't think the chemists are going to be able to just mix up a vat and create more hydrocarbons. It's conceivable that they could, I suppose, but it's not the way to bet. "

 

Full Disclosure: Extremely LONG BP

[nkp007]

I agree with you it is cheap, but the only reason I haven't bought any is because so are RDS and XOM and CVX, maybe not quite as cheap, but they're also not facing some of the same issues.

Attached is the reason why I won't buy oil producers.  I find it ironic that it was only a few years ago that the NG industry went through the shale gas revolution.  We all know what that did to the price of NG.  Now oil is undergoing the same transformation.  Shale oil is a paradigm shift and it is creating too much uncertainty about the price of oil going forward. 

 

http://www.aei-ideas.org/2013/08/us-oil-output-has-increased-2m-barrelsday-in-just-2-years-to-a-24-year-high-thats-like-adding-brazil-to-the-us-oil-supply/

 

The key difference his the high marginal cost of oil.

[kevin4u2]

I agree with you it is cheap, but the only reason I haven't bought any is because so are RDS and XOM and CVX, maybe not quite as cheap, but they're also not facing some of the same issues.

Attached is the reason why I won't buy oil producers.  I find it ironic that it was only a few years ago that the NG industry went through the shale gas revolution.  We all know what that did to the price of NG.  Now oil is undergoing the same transformation.  Shale oil is a paradigm shift and it is creating too much uncertainty about the price of oil going forward. 

 

http://www.aei-ideas.org/2013/08/us-oil-output-has-increased-2m-barrelsday-in-just-2-years-to-a-24-year-high-thats-like-adding-brazil-to-the-us-oil-supply/

 

The key difference his the high marginal cost of oil.

 

What is the marginal cost of a barrel?

[Cardboard]

While I totally agree with Munger that oil will stay high and go higher due to the marginal cost now getting close to $100 per barrel and that few substitutes, if any, exist today for some applications. I totally disagree that it is good policy to hoard something for 50 or 100 years with commodity like price percentage appreciation over time.

 

In other words, that money that has been harvested by the U.S. in the past and now from oil has been reinvested in research and other fields making the U.S. a much more advanced and rich country than it would be otherwise. That is why the U.S. is now able to come up with concepts such as the Hyperloop.

 

People also think that countries like the U.S. depend on Saudi Arabia but, it is more the opposite. Unlike the U.S., they have been hoarding the stuff, creating a cartel and reinvesting very little in their economy to create discoveries. They have been sitting and counting on that wealth and they will sell it to the very last ounce since they have very little else to count on economically.

 

Cardboard

[LowIQinvestor]

BP better be buying back shares today! Very little downside from here given a potentially understated book value.

 

 

[plato1976]

why is bp 's book value understated (say, compared with XOM) ?

 

BP better be buying back shares today! Very little downside from here given a potentially understated book value.

[Ross812]

I bought some recently at $41. The reasoning behind the purchase is BP is selling at a P/E discount of 2-3x to bring it to parity with Shell and Chevron. Over the next 2-3 years the stigma from the oil spill will wear off and mutual fund managers will no longer 'window dress' BP from their holdings and the P/E should return to 7x to 8x on the low side.

 

This is a price appreciation of 40-60%. Stress tested in 2009 with earnings at $5.25 and your still looking at $37 - $42 at a P/E between 7 and 8. Sit there and collect the 6% yield. The bear case: in 3 years you make $37+$6 div. - 41 = $2; bull case $8*8 + 6 div. - 41 = $29 (19%/yr).

 

This is without considering an earnings increase due to the buy back or the possibility that oil prices may continue to increase. There is a reason Seth Klareman has a 5% stake in this company. 

[alwaysinvert]

I bought some recently at $41. The reasoning behind the purchase is BP is selling at a P/E discount of 2-3x to bring it to parity with Shell and Chevron. Over the next 2-3 years the stigma from the oil spill will wear off and mutual fund managers will no longer 'window dress' BP from their holdings and the P/E should return to 7x to 8x on the low side.

 

This is a price appreciation of 40-60%. Stress tested in 2009 with earnings at $5.25 and your still looking at $37 - $42 at a P/E between 7 and 8. Sit there and collect the 6% yield. The bear case: in 3 years you make $37+$6 div. - 41 = $2; bull case $8*8 + 6 div. - 41 = $29 (19%/yr).

 

This is without considering an earnings increase due to the buy back or the possibility that oil prices may continue to increase. There is a reason Seth Klareman has a 5% stake in this company.

Shouldn't a bear case include falling oil prices?

[plato1976]

big oil is usually quite resilient to falling oil prices -

just not sure how low their ER will be if let's say the oil price crashes to $70

 

 

I bought some recently at $41. The reasoning behind the purchase is BP is selling at a P/E discount of 2-3x to bring it to parity with Shell and Chevron. Over the next 2-3 years the stigma from the oil spill will wear off and mutual fund managers will no longer 'window dress' BP from their holdings and the P/E should return to 7x to 8x on the low side.

 

This is a price appreciation of 40-60%. Stress tested in 2009 with earnings at $5.25 and your still looking at $37 - $42 at a P/E between 7 and 8. Sit there and collect the 6% yield. The bear case: in 3 years you make $37+$6 div. - 41 = $2; bull case $8*8 + 6 div. - 41 = $29 (19%/yr).

 

This is without considering an earnings increase due to the buy back or the possibility that oil prices may continue to increase. There is a reason Seth Klareman has a 5% stake in this company.

Shouldn't a bear case include falling oil prices?

[plato1976]

btw,

 

I noticed that SHELL (RDS.A) is also trading at a similar valuation.

1.1x book and near 5% div yield

so , shouldn't we buy SHELL instead of BP ?

With marginally higher valuation, it is litigation risk free

 

I bought some recently at $41. The reasoning behind the purchase is BP is selling at a P/E discount of 2-3x to bring it to parity with Shell and Chevron. Over the next 2-3 years the stigma from the oil spill will wear off and mutual fund managers will no longer 'window dress' BP from their holdings and the P/E should return to 7x to 8x on the low side.

 

This is a price appreciation of 40-60%. Stress tested in 2009 with earnings at $5.25 and your still looking at $37 - $42 at a P/E between 7 and 8. Sit there and collect the 6% yield. The bear case: in 3 years you make $37+$6 div. - 41 = $2; bull case $8*8 + 6 div. - 41 = $29 (19%/yr).

 

This is without considering an earnings increase due to the buy back or the possibility that oil prices may continue to increase. There is a reason Seth Klareman has a 5% stake in this company.

[arbcon]

I read recently on Shell that they have 20 bln in gas shale after a 2 bln writedown....is that a risk?

[plato1976]

Not a plus ?

I think NG bottomed last year

 

I read recently on Shell that they have 20 bln in gas shale after a 2 bln writedown....is that a risk?