CorpRaider Posted September 5, 2014 Share Posted September 5, 2014 I wonder if and how this impacts Lancashire. One would think it would impact rates in the deep water GOM for a long time. Link to comment Share on other sites More sharing options...
LowIQinvestor Posted September 10, 2014 Author Share Posted September 10, 2014 Due to gross negligence ruling, lowering my target to $52-$55 per ADR. But at least I've got the UK on my side! http://www.bloomberg.com/news/2014-09-08/bp-gets-support-from-u-k-government-in-u-s-lawsuit-over-spill.html?cmpid=yhoo Link to comment Share on other sites More sharing options...
apparat Posted October 4, 2014 Share Posted October 4, 2014 Given BP's divestments, has there been any data on what kinds of premiums (if at all) they have been able to get compared to the carrying value of the assets sold? Link to comment Share on other sites More sharing options...
Picasso Posted October 10, 2014 Share Posted October 10, 2014 Interesting to note that BP has been a total return loss of 13% since the start of the 2010 disaster. I believe Einhorn recently took a position in BP... If it keeps dropping at this rate, it will be back at those disaster lows by Halloween. Anyone do any comps of BP to something such as XOM? The capital returns on XOM look incredible. (in billions) Dividends Repurchases 2009: $8.02 $19.7 2010: $8.50 $13.09 2011: $9.02 $22.06 2012: $10.09 $21.07 2013: $10.88 $16.00 Total: $46.51 $91.92 So a total of $138.43 billion minus issuance of $3.76 billion for a net of $134.67 billion. Not bad at all for a stock that has a massive $350 billion dollar market cap in 2009. On top of this, it has only gone from $81 to $91 in that time frame despite lower bond yields, higher oil prices and all that capital returned. 2013 ROIC of 18%, also not bad at all. I suppose incremental returns on invested capital have been shrinking but I should look into this. I can see why Buffett has started purchasing shares of XOM. Not to derail the BP thread but it is probably important to see what you gain in owning BP cheaply versus something quality like XOM. Link to comment Share on other sites More sharing options...
Philip Morris IV Posted December 10, 2014 Share Posted December 10, 2014 Just thought I'd bump this to see if anyone else is taking a serious look at BP here around $37.xx incorporating Q3 information. As of last Q and CC (presentation), everything operational is looking pretty good, litigation and depressed oil notwithstanding. Looking at asset sales to fund more buybacks at a clip of $10 B. YTD, dividends, buybacks and Deepwater reserve funds have been covered by CFO after capex (so excluding divestment after-tax proceeds so far, see pg. 14). Dividend policy is to increase every 2 Qs, and they just paid $0.60 per ADR. So going forward 1yr we can reasonably expect $0.60 + 2 x [some amount higher than $0.60] + [some amount higher]. Back of the envelope for 1yr-out, let's be conservative for fun. Call it $0.60 + $0.61 + $0.61 + $0.62 = $2.44 in dividends: at $37.60 that is 6.49% FY. If the stock recovers even to $45, that is $7.40 in capital gain + $2.44 dividends, or 26.17%. Heck even to $42 that is about 18% and now we're really pushing it. I realize all energy looks attractive right now, but the discount for litigation risk and most attractive yield for the supermajors make this one pretty unique. Link to comment Share on other sites More sharing options...
mttddd Posted December 11, 2014 Share Posted December 11, 2014 Do you have any concerns that they stop the dividend increases or worse cut the dividend? Link to comment Share on other sites More sharing options...
siddharth18 Posted December 11, 2014 Share Posted December 11, 2014 What's the current div payout ratio? Link to comment Share on other sites More sharing options...
Philip Morris IV Posted December 11, 2014 Share Posted December 11, 2014 I am not concerned about the dividend. If anything I would be more concerned about reduced organic capex or buybacks in adverse events. YTD dividend payout ratio is around 47-48% defined by CFO - capex, inclusive of reserves set aside for Deepwater Horizon dealings. Interestingly: they are paying less in total dividends now compared to 2013, despite the per-ADR increase from $0.54 --> $0.60. Dividend hikes are at least partially self-funding via the effect of less shares outstanding. Link to comment Share on other sites More sharing options...
Rainforesthiker Posted December 11, 2014 Share Posted December 11, 2014 Just thought I'd bump this to see if anyone else is taking a serious look at BP here around $37.xx incorporating Q3 information. As of last Q and CC (presentation), everything operational is looking pretty good, litigation and depressed oil notwithstanding. Looking at asset sales to fund more buybacks at a clip of $10 B. YTD, dividends, buybacks and Deepwater reserve funds have been covered by CFO after capex (so excluding divestment after-tax proceeds so far, see pg. 14). Dividend policy is to increase every 2 Qs, and they just paid $0.60 per ADR. So going forward 1yr we can reasonably expect $0.60 + 2 x [some amount higher than $0.60] + [some amount higher]. Back of the envelope for 1yr-out, let's be conservative for fun. Call it $0.60 + $0.61 + $0.61 + $0.62 = $2.44 in dividends: at $37.60 that is 6.49% FY. If the stock recovers even to $45, that is $7.40 in capital gain + $2.44 dividends, or 26.17%. Heck even to $42 that is about 18% and now we're really pushing it. I realize all energy looks attractive right now, but the discount for litigation risk and most attractive yield for the supermajors make this one pretty unique. I agree with you. I think BP is certainly a buy at these prices. This is exactly the kind of panic that creates a market price inefficiency - an inefficient rationale. As the wise man said "This too, shall pass." Link to comment Share on other sites More sharing options...
LowIQinvestor Posted December 12, 2014 Author Share Posted December 12, 2014 never thought I'd see this under book value again! Amazing to compare what BP's stock price was when talking heads on CNBC were questioning whether or not they would go BK back during the oil spill. It bounced around the low 30s. Yet here were are at $36. "Wherever there’s bad news, that is where you should be fishing, in whatever market it may be.” - Peter Cundill Link to comment Share on other sites More sharing options...
Philip Morris IV Posted December 12, 2014 Share Posted December 12, 2014 never thought I'd see this under book value again! Amazing to compare what BP's stock price was when talking heads on CNBC were questioning whether or not they would go BK back during the oil spill. It bounced around the low 30s. Yet here were are at $36. "Wherever there’s bad news, that is where you should be fishing, in whatever market it may be.” - Peter Cundill I was hoping you would chime in. Any new thoughts on your end WRT to Q3/oil/Deepwater? I take it we are just sailing through the two storms of oil prices and DH litigation (in what appears to be a strong ship) while the capital return program is as accretive as possible. It is not everyday that your buyback is so massive, you can increase the per-share dividend and still pay $250M/5% less in total dividends YTD YoY. Link to comment Share on other sites More sharing options...
Valueguy134 Posted December 13, 2014 Share Posted December 13, 2014 BP is always on my radar, but with the lawsuits totalling up to 50-55B (20B for clean water 30-35B for the 3 states suing them), along with a large chunk of revenues coming from Roseneft (with russian sanctions), it makes me think about its true earning power. Particularly if the lawsuits get pressed to the full extent as the clean water act has. You would have to think how they will come up with the money to pay. My guess is it would most likely come from a mixture of debt and asset sales. If assets are sold, it will probably be E&P which bring in the bulk of profits. I look at purchasing BP stock as one where you don't think the sanctions will have much of an effect, along with the lawsuits not getting pressed to the full extent. Link to comment Share on other sites More sharing options...
valueinvestor82 Posted December 13, 2014 Share Posted December 13, 2014 Valueguy, look at Exxon for examples of how these spills play out over time. Ruling, appeal, appeal....they will have earned their weight in cash flow by the time they pay up, and it will probably end up being far less spread out over a large time frame. You need to include PV calculations when asessing the "real" cost of the potential liability. Nice to see Berkowitz (FAIRX) buying, I enjoy his company in my own decisions! Exxon has said that they are interested in BP the longer oil stays weak. RDS is merely rumored to be interested, but we'll see what happens. It's the cheapest of the majors by far. Link to comment Share on other sites More sharing options...
Valueguy134 Posted December 13, 2014 Share Posted December 13, 2014 Not disagreeing with you at all, I'm just saying you have to be comfortable with the problems they are facing. The reason I hold off is more of the fact that I am not completely comfortable with the liabilities they are facing and the large chunk of revenues which come from Rosneft. While they have some phenomenal earning power over the last couple of years, I would just be cautious of how that translates over to the future. Mind you if it does drop some more, I will probably pick it up, as I felt it was fairly valued around $45 per ADR with just the oil spill issue. I have to relook at it again to see how much an impact Rosneft might have. Link to comment Share on other sites More sharing options...
Philip Morris IV Posted December 14, 2014 Share Posted December 14, 2014 While $35B is a scary number, outside the annual report and a few sporadic state- or county-level news stories, these state suits are barely discussed. The 6-Ks, financial media, analysts, UK/US Govs etc. are all centered on the CWA $18B maximum. Either they are ignorant or rolling their eyes here -- I am leaning to the latter. valueinvestor82, do you have a source on comment from Exxon? My impression is that the M&A talk surrounding BP is entirely rumor and, though not unwelcome, pretty unlikely. As for Berkowitz, it is great to see him involved but 54,000 ADR shares is hardly needle-moving. It will be interesting to see come February if he or others have built more meaningful positions. Link to comment Share on other sites More sharing options...
LowIQinvestor Posted December 16, 2014 Author Share Posted December 16, 2014 BP caught between value over volume and falling crude prices: http://www.ft.com/intl/cms/s/0/2383438a-8089-11e4-872b-00144feabdc0.html#slide Pretty amazing that BP is trading near the price when people thought they were going bankrupt from the Macando spill. Can anyone shed light on how the CDS are trading on BP? Link to comment Share on other sites More sharing options...
peter1234 Posted December 16, 2014 Share Posted December 16, 2014 BP caught between value over volume and falling crude prices: http://www.ft.com/intl/cms/s/0/2383438a-8089-11e4-872b-00144feabdc0.html#slide Pretty amazing that BP is trading near the price when people thought they were going bankrupt from the Macando spill. Thanks, this is a good article. When comparing to the past, just remember that the company underwent large changes: The scale of this downsizing has been huge. Since the Deepwater Horizon blowout, BP has sold more than $43bn of assets, including more than half its pipelines, 35 per cent of its wells, and 12 per cent of reserves. Production — excluding Russia — has fallen nearly 30 per cent since 2009, while upstream headcount has risen 13 per cent, in part to address safety issues. Link to comment Share on other sites More sharing options...
Jurgis Posted December 16, 2014 Share Posted December 16, 2014 I would buy BP, but I won't because of the Rosneft holding. This could blow up anytime. Link to comment Share on other sites More sharing options...
mttddd Posted December 16, 2014 Share Posted December 16, 2014 Jurgis are you picking up any of the US oil companies? Link to comment Share on other sites More sharing options...
newyorkminute Posted December 16, 2014 Share Posted December 16, 2014 I would buy BP, but I won't because of the Rosneft holding. This could blow up anytime. Same, I require more blood on the street before I buy. ;-) Link to comment Share on other sites More sharing options...
Jurgis Posted December 16, 2014 Share Posted December 16, 2014 Jurgis are you picking up any of the US oil companies? I bought some APA, some GTE, some PWE. I hold positions in DRAGF and SPND and very tiny one in CVX. I also hold position in NOV and a tiny position in PGN (there is a BK risk for that one). I am looking at some distressed debt as well as prefs and equity. I am not an expert in deep diving into oil cos (i.e. figuring precise cost of production, reserve valuation, reserve replacement, debt maturities, etc.) so please do your own diligence. Link to comment Share on other sites More sharing options...
newyorkminute Posted December 17, 2014 Share Posted December 17, 2014 Why not investing in XOP instead of investing in multiple oil companies? Link to comment Share on other sites More sharing options...
Jurgis Posted December 17, 2014 Share Posted December 17, 2014 Why not investing in XOP instead of investing in multiple oil companies? I prefer to pick my own stocks, but XOP might work as well or even better. Link to comment Share on other sites More sharing options...
valueinvestor82 Posted December 18, 2014 Share Posted December 18, 2014 NYM, let me ask you a question/ this is a value investing board. Why would you buy an ETF where the top 10 holdings are 17% of the portfolio instead of choosing the most mispriced among the bunch? To the previous question about my source for the Exxon comments- I was wrong, I apologize. I thought that I had read specific commentary but all I found were the rumors. It does appear that discussion has occurred in the past between RDS and BP, which might make more sense. I could see Exxon buying the U.S. operations, which seems to be the view of a former high-level executive. Link to comment Share on other sites More sharing options...
Jurgis Posted December 18, 2014 Share Posted December 18, 2014 Why would you buy an ETF where the top 10 holdings are 17% of the portfolio instead of choosing the most mispriced among the bunch? If someone wants to invest into oil price recovery without too much work, XOP might be a good choice. It is not overweight in XOM/CVX like most other sector etfs. And you are removing a lot of per-company risk. If you can deep delve and pick a company that is very cheap, yet not overlevered and will have a good resource progress, you might do (much) better. It is not very simple though. I don't advocate ETFs and I know that investing in them has its own issues, but there are some pros too. :) Link to comment Share on other sites More sharing options...
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