Bp Share Discussion Threads

[skinny] 03/1/2018 14:59

Here we go again....

[alphorn] 03/1/2018 12:55

Extended my long position this afternoon.

[the grumpy old men] 02/1/2018 19:18

How Will BP's Shareholders Benefit From The New Tax Bill?
January 02, 2018, 01:17:26 PM EDT By Trefis Team, Trefis

Shutterstock photo

The year 2017 has ended on a good note for the US corporate sector with the passing of the new tax act in the country. The new law not only entails the reduction of corporate tax from 35% to 21%, it also includes a number of other provisions that will particularly favor the oil and gas industry in the US. As a result, most of the oil and gas companies are likely to witness a surge in their valuation with the implementation of the new tax bill. In our previous analysis, Here's How The GOP Tax Cut Will Impact BP's Valuation , we had discussed how the reduction in corporate tax rate will impact BP's valuation in the coming years. In this note, we aim to talk about the benefit that the recent tax cut will have on BP's shareholders in the next few years.

See Our Complete Analysis For BP Plc. Here

Lower Tax Would Boost Profitability

The US oil and gas industry has been suffering from low profitability and cash flows over the last three years due to the ongoing commodity slowdown. In fact, a number of these companies have been making losses, which helped them to dodge the payment of heavy taxes in the last couple of years. However, with the anticipated recovery in commodity markets, the profitability of these companies is expected to improve, causing them to pay higher taxes compared to the previous two years. That said, the reduction of the corporate tax rate from the existing 35% to around 21% would result in a lower tax obligation for these companies, which is expected to boost their profitability going forward.

Keeping this in mind, we expect BP's net earnings to increase sharply starting in 2018. This would not only augment the company's stock price, causing capital appreciation for the investors, but will also free up cash for the company to grow its dividend payouts or to expand its share buyback program. Besides, the integrated company could also utilize these tax savings to prepay its debt obligations and reduce its interest expenses, which would further improve its profits going forward. Thus, we figure that the tax cut will bolster BP's profitability as well as valuation, which will, in turn, generate higher returns for its shareholders. Further, an effective use of these tax savings will be to allow the company to further enhance shareholder value going forward.

Incremental Gain From MLP

Apart from drastically reducing the tax burden for oil and gas companies, the new tax plan provides for some concessions that will further boost their returns. The new law provides for a 20% business income deduction for individuals holding ownership in pass-trough entities, such as master limited partnerships (MLPs). At present, an MLP is a corporate vehicle, popularly used by oil pipeline companies and real estate companies, that allows parent companies to receive a large portion of the MLP's earnings without paying taxes on it. These distributions are taxed on an individual level rather than on a corporate level. Without this special concession, the individuals receiving income from any of these pass-through entities would have to pay a tax of 37%, based on the personal tax rate under the new law. However, with the provisions of the new act, these individuals would receive a 20% deduction on their pass-through income before paying their taxes.

Interestingly, BP had recently spun-off its midstream business to form an MLP, known as BP Midstream Partners ( BPMP ) to independently run its pipeline business, while taking advantage of a tax efficient structure of an MLP. Now, with the implementation of the new tax bill, we expect BP's shareholders to save taxes on their income from BPMP, which will, in turn, enhance their overall return from the company.

Thus, we figure that the tax reforms implemented by the Trump government are likely to be beneficial for BP, as well as its shareholders, in the coming years.

[optomistic] 02/1/2018 13:08

Good afternoon Bracke, and a very happy and prosperous New Year to you :-)
You are so correct of course re the directors, we must not begrudge them a few tiny perks, after all it's only 42 million shares...

[the grumpy old men] 02/1/2018 11:00

LONDON-- BP PLC is joining a host of companies whose earnings will be dented by the U.S. tax overhaul, saying Tuesday it would suffer a roughly $1.5 billion accounting charge in the fourth quarter because of the legislation.

The charge, which won't affect the company's cash flow, highlights the wide-ranging impact of changes to the American tax code enacted by Congress and signed by President Donald Trump late last year. The accounting hit will weigh on BP's version of net earnings for the fourth quarter of 2017, a period when profits were expected to surge because of buoyant oil prices.

BP said the tax bill would help the company in the long term, reducing the corporate tax rate it and other companies pay in the U.S. to 21% from 35%.

However, in the short term, BP said the tax changes would change the value of its deferred-tax assets. Companies can log such assets during unprofitable periods and use them as credits toward future tax payments. Lowering the overall corporate tax rate makes those assets worth less on paper.

Last week, Royal Dutch Shell PLC said the impact on its earnings will likely be a noncash hit of between $2 billion and $2.5 billion in the fourth quarter. Banks, including Barclays PLC and Credit Suisse Group AG have also warned they will record significant charges in the fourth quarter related to the tax changes.

BP said it is still reviewing the ultimate impact of the tax rewrite.

Write to Sarah Kent at [e-mail]



(END) Dow Jones Newswires

January 02, 2018 05:19 ET (10:19 GMT)

[bracke] 02/1/2018 10:53

Good day optomistic and A Happy New Year to you.

The issue is only 0.21% of the current shares in issue.

Surely you wouldn't begrudge hard working Directors and Managers a few measly £'000's to top up their piggy banks after an expensive Christmas, after all cases of Krug don't come cheap.

EDIT

Added 's' to hares as diplomatically alluded to by optomistic.

[optomistic] 02/1/2018 08:24

"BP p.l.c. announces that on 3 January 2018 it will issue and allot 42,167,832 ordinary shares in connection with distributions to participants in certain of its employee share schemes."

It will need a lot of buy backs to neutralise the dilution by this lot!

Doesn't say who the 'lucky' participants are.

[sarkasm] 02/1/2018 08:23

BP Sees U.S. Earnings Boost from Tax Change; Will Take $1.5 Billion One-Off Charge
02/01/2018 7:44am
Dow Jones News

BP (LSE:BP.)
Intraday Stock Chart

Today : Tuesday 2 January 2018
Click Here for more BP Charts.

By Adam Clark



BP PLC (BP.LN) said Tuesday that it expects recent changes to U.S. corporate taxes to boost its future earnings, but added that it will take a one-off $1.50 billion non-cash charge due to the revaluation of deferred tax assets and liabilities.

The oil company said the one-off charge will impact its fourth-quarter results for 2017, which are due to be released on Feb. 6.

The tax law passed by Congress late last year and signed by President Donald Trump on Dec. 22 includes a reduction of the corporate-tax rate to 21% from 35% and limits on the deductibility of corporate interest payments.



Write to Adam Clark at [e-mail]; @AdamDowJones



(END) Dow Jones Newswires

January 02, 2018 02:29 ET (07:29 GMT)

[ariane] 28/12/2017 23:00

Two top oil major share picks for 2018
By Graeme Evans | Thu, 28th December 2017 - 09:34
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Two top oil major share picks for 2018

The journey has been long and hard, but there's a good chance that 2018 will mark a "sweet spot" for oil majors Royal Dutch Shell (RDSB) and BP (BP.).

That's the view of UBS analysts, who believe there's now a clearer picture of the industry after three years in which companies have scrambled to bring down costs and investment levels in line with oil prices.

In their note "The end of the beginning", UBS's European oil and gas team said an oil price in the $60 to $80 a barrel range now looked increasingly plausible.

They added: "We could be entering the sweet spot for the integrated sector with oil prices recovering, the downstream strong and spending under control."

Having reset their businesses between 2015 and 2017, UBS estimates that the point of cash neutrality for oil majors is likely to be $51 dollars a barrel in 2018. This figure crossed below the oil price in the second half of 2017.

They said: "The prospect for 2018 and 2019 is a sector that funds its investments and dividends and can generate attractive free cash flow (FCF) over and above that.

"We expect the excess FCF to be used to reduce debt, reduce equity in issuance and perhaps some tactical M&A."

Cash returned to shareholders is calculated to rise by 48% in 2018 versus 2017.

UBS makes no apology for having the same two top picks for 2018 as in 2017 - Royal Dutch Shell and Eni (E).

It said Royal Dutch Shell continues to represent the best example of the integrated business model. Its preference for Shell is based on a qualitative judgement of its portfolio and an upside comparison with the much higher-rated international peer, ExxonMobil (XOM).

UBS believes that 2018 will be a year of execution for Shell, having been through the pain of resetting its financial model and dealing with the market's negative reaction to its acquisition of BG Group.

UBS said the criticism of the BG deal misunderstood the weakening competitive position of the legacy Shell portfolio and the quality of the acquisition.

It added that recent Shell investor days have highlighted the value that this deal has brought, and the catalyst it represented on the wider restructuring of the group, which is not fully appreciated by the market.

UBS has a price target of 2,675p, which is based on a 2018 enterprise value (EV)/ debt-adjusted cash flow multiple of 7.4. This is about a 25% premium to the three-year average, reflecting improved capital productivity, and a modest premium to European peers reflecting the company's portfolio advantage.

BP and Total (TTA) are also 'buys' as they join Shell in the "sweet spot" for shareholder value generation.

BP has made significant strategic progress in 2017, while its Gulf of Mexico oil spill payments are expected to tail off significantly in 2018. Six of its seven major projects for 2017 have started up, with the other about to get underway.

UBS forecasts 2016-21 production growth at about 3% per annum.

The company's downstream operations have also been surprisingly strong, with retail, brand driven marketing and lubricants justifying a premium to the corporate multiple.

UBS has a 'buy' recommendation and 550p price target based on an EV multiple of 7.0, with projected 2018 dividend yield of 6.1%.

[the grumpy old men] 28/12/2017 14:34

BP Chief Says Shale Will Have Limited Effect On Global Oil Market
Andrew Ward, Financial Times
Thursday, December 28, 2017 - 8:00am

24

BP_shale_oil_global_market

There is a limit to how big a role U.S. shale can play in the global oil market, according to the chief executive of BP, who said traditional producers such as Saudi Arabia would continue to exert more influence over crude prices.

Bob Dudley said he had become less worried about the extent to which U.S. shale resources could hold down prices as more was learned about their geology.

“There are cracks appearing in the model of the Permian being one single, perfect oilfield,” he told the Financial Times, referring to the region of Texas and New Mexico at the centre of the shale revolution.

Surging production of U.S. shale oil and gas, made possible by advances in drilling technology which has given access to hydrocarbons trapped in “tight” rock formations, has weakened the stranglehold of OPEC producer nations over the crude market.

But Dudley said that emerging technical challenges called into question the ability of shale companies to rival conventional producers over the long term.

“I don’t think [U.S. shale] will be the perfect swing producer now,” he said. “For a while, I was worried. But I think it is going to be less solid.”

The OPEC cartel, acting with Russia, has reasserted its influence over the market in the past year by agreeing production cuts that have pushed crude prices back above $60 a barrel after a deep three-year downturn caused by the shale boom.

The recovery in prices has spurred growth in US tight oil output, which the International Energy Agency said this month would cause global supplies to exceed demand in the first half of next year.

However, analysts at Wood Mackenzie, the energy consultancy, have warned that expansion of U.S. shale production will become harder in the 2020s as the “easiest”; resources are drained.

U.S. “supermajors” ExxonMobil and Chevron are among those investing heavily in U.S. shale, even as independent producers such as Marathon Oil and Continental Resources face investor scrutiny over poor returns on capital.

BP has significant onshore US gas resources from Wyoming to Texas and it is also investing in Argentine shale. But most of its capital remains committed to large conventional oil and gas projects.

Competition from shale has deterred investment in conventional resources in recent years, leading some in the industry to predict an oil supply crunch.

“I’m not yet in the camp that we’re going to end up with a big price spike because of low investment,” said Dudley. “There’s a lot of investment that’s been deferred, that’s for sure. But there are other swing producers like Saudi Arabia who can pull it back.”

Dudley acknowledged that oil faced long-term competition from electric vehicles but said the technology had been “hyped” and that environmental problems surrounding the mining and disposal of materials used in lithium-ion batteries that power electric vehicles had been under-estimated.

He added: “For at least 10 years, and probably longer, oil demand will go up because of prosperity and population growth. And then, when it starts to go down, it’s going to be a gradual decline. So there will be, until well into the second half of the century, a need for oil.”

[maywillow] 28/12/2017 11:59

BP restart ETAP and Bruce fields as Forties gets going again

Written by David McPhee - 28/12/2017 10:54 am

BP news
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BP has confirmed that it has restarted the ETAP oilfield system alongside the Bruce field, but that the Andrew platform remains in shutdown.

BP announced that it would be beginning a restart in production yesterday, but that they expected the restart to be in full swing today.

The Andrew platform is to receive planned maintenance, which accounts for its current shutdown status.

The restart comes on the back of the news from the company responsible for the Forties pipeline, Ineos, announcing that it will have the pipeline ‘back to normal’ by new year.
Related Articles

Forties pipeline ‘back to normal’ by new year
Forties pipeline to be repaired by Christmas
Shell shuts down Shearwater, Nelson platforms amid Forties closure

Other North Sea operators, such as Shell and Apache, announced a partial restart as the news broke of the Forties pipeline mechanical repair yesterday.

Shell said: “Shell UK can confirm that a gradual restart of production operations has commenced on the Shearwater and Nelson platforms in the central North Sea.”

Ineos today apologised to customers and the local community for the disruption caused by the closure and repair work required.

The crack and subsequent leak in the Forties pipeline has caused widespread disruption since its discovery nearly three weeks ago.

[maywillow] 28/12/2017 10:25

MAY THE HIGHEST BP YOU HAVE IS THIS OILIES SHARE PRICE

[maywillow] 28/12/2017 10:24

Shame ADVFN does not sort out the disruptors and negative trolls who do not state their case

BEST WISHES FOR 2018

HERES TO MUCHOS HAPPINESS CON HEALTH

[waldron] 28/12/2017 10:15

No snow here YETI

[alphorn] 28/12/2017 10:12

Thx! A snowy day!

[waldron] 28/12/2017 07:37

yep

only time will tell now

enjoy your day Alp

[alphorn] 27/12/2017 23:03

We don't know which elements relate to US taxes - that gives one hell of a range!

The company will already know the effect as mathematics. I would have thought that they are bound to issue an RNS if material. Same goes for any other company.

[alphorn] 27/12/2017 17:16

Grupo - yes, any rate change will 'revalue' some deferred tax balances.

[grupo guitarlumber] 27/12/2017 15:00

Alp

if it has deferred tax impacts, it sure will have some surprises

[alphorn] 27/12/2017 14:53

Wonder if any charges coming for BP in Q4 from the US tax changes?

[sarkasm] 26/12/2017 21:26

Why BP Is Changing Its Tune On U.S. Shale - Smokescreen Or Something Else?
Dec. 26, 2017 2:51 PM ET|
4 comments|
About: BP p.l.c. (BP), Includes: BNO, DBO, DNO, DTO, DWT, OIL, OILK, OILX, OLEM, OLO, SCO, SZO, UCO, USL, USO, USOI, UWT, WTID, WTIU
Gary Bourgeault
Gary Bourgeault
Long only, research analyst, portfolio strategy, media
(4,875 followers)
Summary

CEO Bob Dudley no longer sees U.S. shale being the swing producer he thought it would be.

Could be smokescreen for soaring, record shale production.

BP could be pushing against ceiling after 15 percent push over last several months.

source: Stock Photo

BP (BP) has been known for its contrarian views on the future of oil, including the time it'll take for the market to mature and demand to reverse direction. It believes it'll take longer than most are estimating at this time.

What's new in the outlook of the company is has changed its views on the threat posed by the U.S. shale industry, with BP CEO Bob Dudley recently telling The Financial Times that he isn't as concerned as he used to be about the long-term impact of shale supply on the market.

He said this:

There are cracks appearing in the model of the Permian being one single, perfect oilfield.”R20;For a while, I was worried. But I think it is going to be less solid.

The change appears to come from analysts at Wood Mackenzie which have asserted the production pace of U.S. shale will be difficult to maintain in the 2020s because of the focus of producers on the “easiest”; assets they hold. That was a reference to targeting premium wells held in their inventory.

I'm somewhat skeptical of the changing outlook of BP, primarily because it's in its best interests to maintain the growth narrative it has, which doesn't include much shale. The majority of its oil fields are conventional.
Is the future of U.S. shale fading?

There have been a growing concern among some in regard to the sustainability of the pace of U.S. shale growth. The concern comes from questions surrounding what type of oil assets will remain after the easy oil has been extracted, and whether or not the margins and earnings will remain in place if the costs remain the same while getting weaker results.

One of the major problems associated with accurately projecting shale output in the U.S. is in how rapidly they continue to improve efficiencies. For example, the International Energy Agency said "flexibility and innovation" make it hard to get a solid grip on what U.S. production will be in the future. That's why assumptions based upon the best wells being difficult to replace aren't necessarily how it'll play out; that's especially true in the long term.

The short term is easier to project, as the most recent outlook from the EIA was raised for 2018, with the average U.S. output now expected to average 10 million barrels per day, which will easily surpass the prior average daily production level of 9.6 million barrels per day in 1970. In 2017 the average has been 9.2 million barrels, according to the EIA.

As for shale's contribution, in January the Energy Information Administration said it expects production in the U.S. to jump by about 94,000 barrels per day to a record of 6.41 million barrels per day.
My concerns about the change in outlook

The major concern I have over the outlook of BP concerning the impact of shale is the fact Dudley felt the need to make the comment in the first place. Attempting to reinforce the narrative of a fading long-term outlook for U.S. shale could be for the purpose of taking investors' eyes off of BP's exposure to conventional oil fields. It also could point to the possibility the current price of oil may be considered to be unsustainable going forward.

If that's the case, BP would struggle more than some of its peers that have significant exposure to lower cost shale oil. After the Gulf oil spill BP had to divest of its shale assets to bolster is balance sheet. Once the smoke cleared the costs of shale oil assets had skyrocketed, making it difficult to justify the prices now asked for.

As the IEA noted, it is close to impossible to give an accurate long-term estimate of U.S. shale oil production levels because of the ongoing improvements companies are making in drilling. That suggests the premium wells may not be the factor Dudley and others think they'll be once they start slowing down in production.

The problem for BP in my view is it may struggle when measured against the performance of its peers if the price of oil stagnates or reverses direction. I think that, more than the technical challenges Dudley sees shale producers presumably facing, is the real issue for BP, which has decided to compete primarily with conventional assets.

Why that's significant is BP needs the price of oil to remain in the range it has been trading to generate solid results. Competitors with more shale exposure can generate a profit at a lower price point.
BP's recent performance

Over the last several months BP has had its market value soar by about 15 percent. That appears frothy to me, and it could struggle through 2018 if the price of oil stumbles, which would lower the earnings performance of BP. Although I think it would push some to question the sustainability of the 40 cent dividend of BP, I still believe it'll keep that in place unless the price of oil plummets.

In the near term there is some significant risk to BP because OPEC and others participating in the production cut deal have yet to provide any details of an exit plan. If the deal, at least in some form, is terminated, and U.S. oil production climbs to at least the 10 million barrels per day average the EIA is estimating, it will put downward pressure on the price of oil.

Demand would have to exceed expectations if growing supply is to be offset and the price of oil is to remain in its current range. I think that's going to be hard to achieve.

With BP being rewarded by the market as it has been with the boost in the price of oil, I think it's going to be hard to continue on like that over the next couple of years. The reason for that is I think BP has the price of oil priced in about as much as it can be under current market conditions.

I think the risk for oil is on the downside over the next year.
Conclusion

In both the short and long term I think BP could struggle, now that the price of oil has probably plateaued. Years down the road when demand organically catches up with supply, that is likely to change, but I'm far from convinced BP or others with a lot of exposure to conventional oil will get the benefits of an assumed decline in shale production because of depletion of quality oil wells.

All of that assumes technological breakthroughs will be stagnant and the remaining well inventory is comprised primarily of lower quality potential. While some of the wells won't produce like the current premium wells, there's nothing to suggest a lot of quality DUC wells are on the sidelines and will be brought to market over the years. There's also nothing to suggest improved technology won't allow for an increase in productivity from other wells, or that many new discoveries won't be made.

The other factor is oil production from Canada and Brazil should continue to climb, and that'll play a part in the price of oil as well.

I think BP has positioned itself well under the current market conditions, but it needs to price of oil to remain high in order to successfully and profitably implement its production strategy. It has improved its costs, but overall, they remain higher than many shale producers.

BP should be able to retain its dividend at current levels, but with the company believing or possibly hoping the shale industry isn't going to be able to compete and grow at the levels it is now, that narrative is how it'll have to play out now that its major focus is on conventional plays.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.