On November 2, 2021, oil giant bp reported earnings which failed to be spectacular in our opinion however the interesting news from the conference call provided some useful insight into the changing landscape for the energy industry.
For starters bp seems continues to build on partnerships in large markets with DD in China and Jio-bp in India. These activities immediately check one of our investment check boxes of global sales and notes the following:
In China, we opened our 100th site in China in EV charging in the quarter. We’re up eight-fold year-on-year in terms of the number of charge points in China. And I would just let you know that China took 11 years to go to five percent of EVs in the marketplace and it took seven months to go from five to 10%. So DD is an excellent partner for us there.
bp earnings conference call
In addition to these partnerships, bp continues to work towards what it calls an “integrated energy company” delivering various types of energies to a diverse consumer base from oil, gas, hydrogen, electric and others. This ticks another checkbox of innovative; BP is investing in building out elective vehicle (EV) charging spots throughout the world.
In the conference call, bp announced it would execute share buybacks:
BP intends to execute a further buyback of $1.25 billion prior to fourth quarter results. And we expect to outline plans for the final tranche of buybacks from 2021 surplus cash flow with our fourth quarter results. Based on BP’s current forecast at around $60 per barrel Brent and subject to the Board’s discretion each quarter, we continued to expect to be able to deliver a buyback of around $1 billion per quarter on average, with upside at higher prices, and to have capacity for an annual dividend increase of around four percent through 2025.
bp earnings conference call
This ticks a third checkbox income/dividend generation.
Despite all of this, investors didn’t seem to take news well as bp stock is trading around $27/share at the time of this writing. The stock also has a P/E ratio of 14 which ticks yet another checkbox of reasonable P/E ratio. We will follow up in the next quarter’s release to see how the stock is doing.
Image Courtesy: Nasa
One of the activities we like to execute against any earnings call is to take the words used during the conference call and run them through a word frequency use analyzer. Analysts generally ask very open ended questions to probe into the mindset of the people answering the questions so we like to take a look at the most frequently used phrases. What’s on bp’s mind based on frequency of word use?
Top words (in order of most use): gas, oil, charging, cash, value, returns, price convenience, investor, energy, prices, flow, margin, trading, projects, future, capital, portfolio, offshore, LNG, Europe, carbon, utilization, strategy, production, growth, wind, transition, surplus, share, risk, investment, hydrogen, debt, renewables, markets, ev, jio, hydrocarbon, fuel, dividend, supply chain, team, supply, partnership, mobility, china, electrons.
Disclosure: One or more members of the Econonaut hold long positions in bp stock.