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Where is the BP Plc shares headed? |
kumarcalcutta
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 Posted: Tue Jun 01, 2010 5:45 am Post subject: Where is the BP Plc shares headed? |
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BP Plc share price analysis
28th May, 2010.
BP Plc’s share plunged more than 23.5% on YTD basis. The news on BP and its uncontainable oil leak in the Gulf of Mexico is primary reason for this disastrous performance. When we compare its price performance with its competitors - Chevron Corp (CVX), Exxon Mobil Corp (XOM) and Royal Dutch Shell (RDS-B) - we find that BP has significantly underperformed its competitors’ performance.
Now, the following questions arise: -
a) What is the best estimate of the scale of BP’s potential liabilities?
b) How long it would take the stock to settle?
c) Is BP a takeover target for other major oil companies?
d) Finally, is it a right time to buy BP? |
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Where is the BP Plc shares headed? Replies |
HenryTo
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| Posted: Wed May 02, 2012 12:58 am Post subject: |
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Morningstar on BP's 1Q results.
| Quote: | | Although BP's first-quarter results were somewhat weak, our first take is that this is simply short-term noise and does not reflect the company's long-term recovery story. To us, the road to recovery for BP is still on track, although it's a road filled with uncertainty (relating to the ultimate cost of fines and lawsuits) and no or negative growth (due to asset sales). Our fair value estimate is unchanged. Pretax profits were $7.4 billion, slightly up from last quarter but down sharply from the $9.2 billion generated a year ago. The biggest driver was the c ontinued weakness in the downstream segment, where pretax profit of $924 million was down roughly $1.3 billion year over year. Though refining margins are likely to begin strengthening this quarter, BP's petrochemical operations are still suffering from high feedstock costs and poor geographic positioning. As a result, downstream results could remain underwhelming for a while to come. BP's upstream segment showed a slight decline in profits, largely due to oil production falling to 1.25 million barrels per day from 1.4 million b/d a year ago (excluding TNK-BP, whose production was flat). But new projects coming online during 2012-13 in Angola and the North Sea as well as a bounce-back in Gulf of Mexico volumes (though not until 2013) mean that production volumes are likely to begin stabilizing later this year. |
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HenryTo
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| Posted: Mon Mar 05, 2012 8:16 pm Post subject: |
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Update on BP's Macondo situation.
| Quote: | | Over the weekend, BP reached a settlement preliminarily estimated at $7.8 billion to resolve the Macondo-related economic loss and medical claims by individual and business plaintiffs. A trial was to begin this week in New Orleans (MDL 2179), which has now been postponed indefinitely. The funds for this can be sufficiently met from the $20 billion Gulf Coast Claims Facility that BP set up after the oil spill. Though this fund is expected to be wound down and replaced by a court-administered claims process, it appears BP still has to pay the remaining $4.9 billion it owes to fully fund the GCCF. Further, major considerations are still unresolved, most important the fines that BP and its partners face from violating the Clean Water Act and Oil Pollution Act. Cross-claims between BP and its Macondo partner Transocean RIG also remain. As such, the parameters of this settlement have not as of yet changed any of our assumptions relating to the ultimate cash flows BP will incur because of Macondo; this announcement therefore is not materially altering our outlook or valuation of BP’s shares. In our view, the largest positive of this settlement from the company’s perspective is likely to be the avoidance of publicly reliving the oil spill and all of the subsequent damage it caused, as would have occurred during the trial. |
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HenryTo
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| Posted: Tue Feb 07, 2012 3:08 pm Post subject: |
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Morningstar on BP's latest earnings.
| Quote: | | Excluding a $4.1 billion credit related largely to its Anadarko APC settlement, BP's BP underlying results to end 2011 were on the whole unimpressive. Unsurprisingly, downstream results fell off, as refining margins were very weak in many regions during the fourth quarter. BP's downstream unit posted a profit of $564 million, $400 million less than the same period in 2010 and almost $1 billion less than the previous quarter. Downstream weakness appears likely to be short-lived, in our view, as refining fundamentals already have begun to show signs of improvement. Far more important is BP's upstream segment, where replacement profit was down 5% to $7.6 billion from $8 billion in the prior year. This is in stark contrast to the upstream results of the other majors, where companies posted strong growth (Shell RDS.A saw upstream profits grow by 48%, for example). Of course, BP has one hand tied behind its back: Forced asset sales to fund Macondo obligations and low levels of production in the Gulf of Mexico are taking their toll on results. Production volumes were down to 3.5 million barrels of equivalent per day from 3.7 million, with the U.S. being the geography where production figures showed the largest declines. BP appears to hope that 2012 is the last year before it can start driving significant improvement in its results. Though production is projected to be flat, six major projects are expected to start up, and eight rigs are expected to be operating in the Gulf of Mexico. Adding this up, BP expects it can drive 50% operating cash flow growth by 2014 verses 2011 with oil prices at $100 p er barrel. In our view, such a feat is going to be difficult to accomplish, given that the company still has almost $20 billion in divestments it intends to complete. BP is projecting the cash flows from these divestments will only have a modest negative impact, which to us looks a little too optimistic. Though the worst of Macondo appears to be behind it, the specter of the disaster is likely to haunt the company by challenging its ability to generate its hoped-for results for some time to come. |
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nodoodahs
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| Posted: Tue Oct 25, 2011 1:47 pm Post subject: |
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BP now roughly flat with the SPY for returns since July 2010.
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rffrydr
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Location: Sunny California
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| Posted: Tue Oct 25, 2011 11:15 am Post subject: |
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BP results, UBS:
| Quote: | BP reported clean net income of $5.3bn, beating UBSe of $4.99bn by 7% and consensus by 8%. Earnings were down 4% y/y and 5% q/q. Operating profit ($8.1bn) beat by 5%, led by better than expected upstream earnings. The dividend was as expected at 7c/share. An additional $0.6bn (pre-tax) charge for Macondo was announced, bringing the total pre-tax charge to $41.3bn. The outstanding liability is $6.6bn. The $4bn contribution from Anadarko is to be recognised in 4Q.
BE
Of more interest in our view was BP’s announcement that this marks a “turning point” for operations and production. BP has increased its disposals target to $45bn
from $30bn previously (new target includes the previously announced refinery sales). $26bn of sales has been announced so far. We think this increase in realising NAV will be taken positively by the market. BP is now targeting a 50% increase in operating cash flow by 2014 from 2011 at $100/bbl, which looks consistent with our targets. Production looks on track to hit/beat the 3.4Mboe/d FY target.
BE
Upstream earnings of $7.1bn were an 8% beat on better gas realisations and a lower exploration charge. As expected, production was down 10%, largely on
lower GoM production and disposals. R&M earnings of $1.7bn were a 3% beat vs. consensus, flat y/y. Capex and net debt in 3Q were both a little lower than UBSe. |
| Quote: | Comparative valuation highlights under-valuation – As further
evidence of the market’s continued negative bias, BP’s valuation
continues to languish. For example, we measure a 2011E PER and
EV/DACF multiple of just 6.3x and 4.6x respectively versus RD Shell
8.8x and 6.5x respectively. BP trades at a 45% discount to our SOTP (see
chart on first page) versus RD Shell’s 13% discount. On a downstream
adjusted basis, BP trades on a proven reserve multiple of $5.2 per boe
versus RD Shell $10.5 per boe. Interestingly, if we also exclude any
value / proven reserves for BP’s stake in TNK-BP, BP also trades on just
$5.2 per boe. We remind that BP’s non-core asset sales have realized an
average proven reserve multiple of $11.3 per boe. |
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rffrydr
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Joined: 30 Oct 2005
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Location: Sunny California
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| Posted: Tue May 17, 2011 6:34 am Post subject: |
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RBS on BP Artic chill:
Although BP IR is stressing that BP is still in talks with Rosneft and AAR, it is not clear what these talks are about.
BE
Evidently, feathers have been ruffled on all sides and one possibility is that talks are now focused on ensuring smooth ongoing relations.
BE
Our working assumption is therefore that both elements of the previously announced deal – the Arctic exploration element and the share swap – are now unlikely to go ahead.
BE
Probably the impasse with AAR will raise questions about the sustainability of the partnership
between BP and AAR in TNK-BP, but we would point out that this has survived considerable
strain in the past.
BE
Given that the Rosneft deal was presented by BP as a part of its rehabilitation in the
aftermath of the Macondo accident, the apparent failure of the deal may create something of
a hole in the BP story that management may feel the need to address. It is not clear at this
time what any replacement might be.
BE
Although we assume that the apparent failure of the deal is a significant disappointment for
BP management, whose reputation has been tarnished by these recent developments, we
believe investors will be pleased that the controversial share swap element of the deal will not
take place and that recent uncertainty appears (almost) over
BE
We believe that some analysts and investors have previously included the dilutive impact on
EPS of the share swap in their forecasts (we did not do so). If the share swap is finished, as
now seems likely, this may force these analysts and inventors to upgrade their EPS forecasts.
We assume that part of the attraction of the share swap from a BP perspective was to
introduce a substantial, stable shareholder to create a degree of protection against possible
takeover. If the share swap does not go ahead, this negative for the share price is eliminated.
BE
BP’s shares have underperformed peers by 11% since the Rosneft deal was announced in
January. Assuming that the Rosneft deal is now unlikely to go ahead, we regard this as a
considerable over-reaction and would expect today’s news to generate improved relative
performance in the coming days.
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rffrydr
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| Posted: Thu Apr 28, 2011 4:09 pm Post subject: |
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The Rosneft....(sp?) is just another great big tar-baby. Glad I didn't bite on that one. Absolutely right idea though--can't kill the pusher.
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nodoodahs
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| Posted: Thu Apr 28, 2011 12:11 pm Post subject: |
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| nodoodahs wrote: | | Bottom, in retrospect, came within two weeks of the div cut announcement and maybe 10% plus or minus below the price at the time of the cut. Today it's trading at something like 30%+ above the price at the time of the cut. Most of the outsize returns relative to the SPY or the OIH came in the month immediately following the cut, i.e. BP has been tracking the overall U.S. stock market in the last few months. Fortune, it seems, favored the bold once again ... |
Yes fortune would have favored the bold. Update since November, BP has been volatile but at the moment total returns flat relative to the SPY, but BP has thoroughly under-performed the XLE since November.
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HenryTo
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| Posted: Thu Apr 28, 2011 12:28 am Post subject: |
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Morningstar on BP's 1Q earnings:
| Quote: | | BP's BP post-oil-spill challenges continue to weigh down earnings, as lower-than-expected production offset the benefits of higher oil prices and refining margins. The firm's first-quarter replacement cost profit of $5,481 million was 2% below year-ago earnings of $5,598 million, as an 11% decline in production offset the benefits of a 30% gain in oil prices on the upstream side and downstream earnings gains. We had expected production declines from the sale of upstream assets over the past year, but to a lesser extent, warranting a review of our model assumptions. We anticipate that the impact of asset sales will continue to drive lower production comparisons to year-ago levels for the rest of this year. We were encouraged to see oil-spill-related costs winding down with a $0.4 billion pretax charge during the quarter, as the majority of the subsea work and shoreline cleanup phase was completed during the first quarter. We expect smaller oil spill charges in upcoming quarters for remaining shoreline cleanup efforts. Our central concern about BP remains how the firm will execute longer-term growth plans after reshaping its upstream and downstream operations. The firm had mixed results during the quarter. We were encouraged by new deals such as a new development agreement with Reliance Industries in India and deep-water exploration blocks awarded in Australia. However, failure to move forward with the joint venture with Rosneft casts some doubt on BP's ability to quickly secure major long-term growth projects. We'll monitor the firm's efforts to sell selected U.K. North Sea assets and two U.S. refinery plants, but recognize that these sales could take longer than expected, given a crowded market of assets for sale by major oil peers. We'll look for details on BP's progress with projects under way, safety initiatives, and cost-control programs during the analyst call. |
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rffrydr
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HenryTo
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| Posted: Wed Feb 02, 2011 1:03 am Post subject: |
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Morningstar on BP's 4Q earnings and asset sales:
| Quote: | | BP delivered on the widely anticipated resumption of its dividend when it released fourth-quarter results, but scaled back on production goals for 2011 and announced plans to sell half of its U.S. refining capacity. While we're encouraged by how BP is moving forward with asset sales and plans to instill a new safety regime, we're still concerned about longer-term challenges on executing growth plans and uncertainty over future regulatory and legal penalties. BP resumed a quarterly dividend of $0.42 per American depositary share, or $0.07 per ordinary share, to be paid March 28. Adjusted replacement cost profit for the four th quarter of $4.4 billion was flat with year-ago adjusted earnings. BP is well ahead of asset sale goals of as much as $30 billion by year-end 2011, with agreements for $22 billion in sales already signed by year-end 2010. The firm also plans to sell two U.S. refineries--Texas City and Carson--for more than $3.7 billion, as estimated by BP's refining head, Iain Conn. BP is has moved forward with new exploration agreements and licenses in Brazil, South China Sea, Indonesia, Azerbaijan, the United Kingdom, and recently Australia, and its contested alliance with Rosneft. However, BP has several longer-term challenges and uncertainties. Our concerns about its execution on growth plans are evidenced by lower-than-expected oil and gas production. Fourth-quarter production declined 9% from year-ago levels to 3.67 million barrels of oil equivalent per day versus our estimate of a 6% decline. BP expects a further production decline to 3.4 mmboe/d in 2011, warranting a review of our model assumptions. Not surprisingly, BP cited lower Gulf of Mexico production as one of the reasons behind the production decline, along with the impact of asset sales. We believe challenges in securing regulatory approval for drilling permits in the Gulf of Mexico will persist for years. The firm took another $1 billion charge for oil spill-related costs during the fourth quarter, bringing the total oil spill charge for the year to $40.9 billion. BP now estimates claims against its $20 billion claims fund to range between $6 billion to $13 billion based on claims data, insurance industry benchmarks, and management judgments. However, uncertainty over the final claims amount and longer-term legal and regulatory penalties persists. |
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HenryTo
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| Posted: Mon Nov 29, 2010 2:14 pm Post subject: |
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Morningstar's update on BP's asset sales:
| Quote: | | BP took a major step toward reaching its goal of $25 billion-$30 billion in asset sales by year-end 2011 with the announced sale of its 60% interest in Argentine joint venture Pan American Energy for $7.06 billion to joint venture partner Bridas. This sale would bring total planned asset sales to $21 billion since the firm announced its asset sale program to help cover Gulf of Mexico oil spill costs. We view it favorably, as BP is selling another a noncore asset with limited production impact. The deal includes a $3.53 billion cash deposit with $1.41 billion due Dec. 3 and $2.12 billion due Dec. 28; the balance is due at closing in 2011. BP will be selling its interest in Pan American Energy's upstream operations in the Southern Cone region of South America with interests in blocks in four hydrocarbon basins in Argentina--Golfo San Jorge, Austral, Neuquen, and Northwest--along with transportation, storage, gas distribution, and power generation facilities. Net production for BP's 60% interest in the joint venture was 143,000 barrels of oil equivalent per day, which represents only 3.6% of BP's total production including joint ventures. |
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rffrydr
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| Posted: Thu Nov 04, 2010 9:47 pm Post subject: |
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God's little creatures, bacteria, in scale and appetite heretofore unknown favored us all.
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nodoodahs
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| Posted: Wed Nov 03, 2010 12:46 pm Post subject: |
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| nodoodahs wrote: | | ...I'm concerned now that the CDS spastic crowd is raiding BP (probably anticipating a div cut, or actively trying to trigger one). At some point it'll be a buy, but the only clear gameplan I can think of is, if a dividend cut is announced, finding an accumulation zone/stoploss combo under the post-cut price. |
| nodoodahs wrote: | | BP div cut announcement. Will be interesting to see if the Jun 9 low holds. Hypothetically, it presents a "the worst news is out" trading opportunity (with stoploss, etc., in place). |
Bottom, in retrospect, came within two weeks of the div cut announcement and maybe 10% plus or minus below the price at the time of the cut. Today it's trading at something like 30%+ above the price at the time of the cut. Most of the outsize returns relative to the SPY or the OIH came in the month immediately following the cut, i.e. BP has been tracking the overall U.S. stock market in the last few months. Fortune, it seems, favored the bold once again ...
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rffrydr
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| Posted: Wed Nov 03, 2010 9:23 am Post subject: |
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Goldman upgrades (watch out):
| Quote: | BP reported strong underlying 3Q results, with adjusted operating profit
(ex. GoM charge) of US$7.77 bn, 7% ahead of company-compiled consensus.
The beat came across both E&P (better realizations and TNK-BP results)
and R&M. BP took an additional Gulf of Mexico charge in the quarter of
US$7.7 bn pre-tax (on top of US$32 bn booked in 2Q) primarily due to the
longer time taken to complete the relief well and the higher cost of the
intervention. We increase our 2010E/11E/12E EPS by 6%, 4% and 3% on
higher E&P realizations and stronger R&M earnings. Our new price target
(up 4%) implies 27% upside and we upgrade the stock to Buy from Neutral. |
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