playing defense with bp, safe 6.1% yield with upside - oil spill pads

by:Demi     2019-09-15
playing defense with bp, safe 6.1% yield with upside  -  oil spill pads
Here is the report we have prepared with author Long Player.
Today, we emphasize defensive stocks that a member can consider.
Most of you are familiar with this company. it is BP plc (NYSE:BP)
One of the world's largest integrated oil companies, with a market capitalization of $134 billion.
The current output of BP is 6. 1%.
The company recently raised its dividend.
Cash flow is huge and can easily support future growth.
The stock's recent pullback offers attractive valuations.
This is a defensive stock, and earnings investors can consider buying and holding in the long run.
This very big downside risk is limited.
Stocks, forward returns should be very attractive.
Abnormal fluctuations in oil and gas inventories.
Even some better names have been beaten unfairly.
However, this means that in the future industry recovery, these better names will be rewarded like some of the more speculative stocks without risk.
BP is one of those defeated.
Falling stocks, whose earnings will not be as affected as those with less income
Diversified competitors.
Bp is a very good stock because he is in defensive position.
The market put oil and gas stocks in the kennel.
The company has a consumer goods business unit.
Whenever a store in a car supply store, there are BP products on the shelves.
The profit margins of these products are relatively stable.
A cyclical history
Car owners tend to repair their cars in times of recession or uncertainty and take care of them more.
BP's dividend now exceeds 6%.
Traditionally, big companies like BP buy more than 6% hours of dividends.
Research shows that the average return on the stock market is 7%.
Most of the returns come from dividends. A low-
Risk companies like BP will easily be higher-
Average dividends and inevitable rebound in the future.
Many observers believe the current share price decline is drawing to a close.
So the return on this stock may be well above average in the next few years. (
Source: BP upstream investor briefing 2018)
The Gulf of Mexico oil spill scared the company's management of some improvements that should have been made long ago.
Most importantly, security now is much more important than in the past, and BP's security record has improved a lot in the past few years.
No management wanted to go through what the company was going through due to the oil spill.
As mentioned above, there is also an effective drive to reduce costs at the same time.
Projects like cost, big companies usually take a while
The cutting drive takes effect.
In this case, the result of the cost
The market is becoming more and more obvious. This low-
The cost method is very different from the past company history (
Safety is emphasized).
Frankly, the company will be struggling to achieve a very low oil price, which is more costly during 2016.
The cutting drive did not start due to oil leakage.
Upstream profits are now much higher than in the past.
By owning the refinery, BP's diversity has helped more. Like Exxon (XOM)and Chevron (CVX)
The company will show substantial gains at the bottom of the market.
In addition, its balance sheet and ratio is the investment grade.
So even in bad industry conditions, it has enough access to the debt and capital markets.
In the past, BP sold assets to raise funds to cover the losses caused by oil spills in some of the worse industry conditions in recent years.
The company has top assets.
Therefore, its ability to raise money at an untimely time is much better than many in the industry.
The company has also invested in renewable resources.
Back in 2013 BP launched one of Britain's largest biofuel plants.
The factory produces creatures
Ethanol and animal feed from wheat.
It is estimated that a large amount of greenhouse gas can be saved in this process.
Recently, the wind energy business has undergone some restructuring to improve profitability.
The company has also recently expanded its solar sector.
In short, if some alternative energy "takes off", BP will have a subsidiary that may be involved in the growth.
Another major change is the "sunset clause ".
When the cost rises above a certain threshold, management will sell or abandon the project.
Stable inflows of new projects should remain low-cost or reduce these costs in the future.
To ensure future growth, the management is currently working on major stable projects.
The difference is that the estimated cost of many of these projects is much lower than in the past, because projects are usually high now --graded.
BP is different now than before.
BP has maintained a very strong cash position at all times.
The current cash balance is $26 billion and an additional $3 billion is sold.
Total debt was $55 billion, but net debt was $29 billion.
In the most recent quarter, cash flow from operating activities was $6 billion. The 9-
In 2018, the monthly cash flow from operating activities was $16 billion, an increase of approximately $3 billion over the previous year.
The latest cash payment for the oil spill was about $0. 6 billion.
To further promote the growth of cash flow, these payments are expected to decrease in the future.
It's easy for BP to pay a quarterly dividend of $1 billion.
The company does have a Didi plan to further reduce the cost of dividend cash.
The dividend has recently risen, and the current dividend is about 2.
5% higher than the previous year.
Major acquisitions of BHP Billiton (BHP)
The use of this cash will be paid.
The property sold will then be used to reduce the debt.
The global consumer recession will lead to weak oil pricing and overcome several advantages of corporate diversity.
As shown in 2016, the refinery's profits eventually contracted, and the temporary profitability was very limited before the market began to recover.
Nevertheless, many companies in the industry suffer far more losses.
The consumer goods sector has its own cyclical nature.
It is often counter-cyclical.
However, if the period of over-competition overlaps with the recession, the company may be hit "double" and suffer a sharp drop in unaccustomed profits.
For a long time, there have been problems with low efficiency and poor safety records in company management.
This kind of management is likely to fall into the danger of those very bad habits again.
This will offset the impact of current costs
Safety records have been greatly improved.
This management has one of the better records in finding oil.
This may change at any time in the future.
Low oil prices and low oil prices have always been industry risks.
The company has a lot of diversity to prevent both.
But such events will still affect earnings.
Although safety records have improved significantly, expensive accidents and the resulting news coverage are an industry risk.
Management reduces production costs and focuses on low
Decline project.
BP management will focus on upstream growth for the first time in a period of time.
As shown below, the company starts with several industry advantages. (
Source: BP upstream investor briefing 2018)
Management conservatively planned to stabilize costs.
However, like many in the industry, this management continues to try new lows
Cost technology may drive costs less than the 45% savings already noted in the past few years.
The lower base means maintenance capital in the upstream sector will remain relatively low.
Production costs fall with old, higher sales
Cost projects and continuous introduction of new production. (
Source: BP upstream investor briefing 2018)
Management expects free cash flow for the next fiscal year to be at least $14 billion as long as WTI oil prices average around $55 a barrel.
This forecast is about $10/barrel higher than the current offer.
The price assumption is consistent with many other forecasts of 2019.
BP also acquired a large number of leased assets from BHP Billiton in 48 states.
Traditionally, BP has been very active outside the United States.
However, BHP Billiton's acquisition could mark a new entry into unconventional areas on US land.
BP has not officially announced
The long-term strategy of the acquisition.
The company has many growth opportunities, and the responsibility for the oil spill is now very good --
Valuations fell.
This stock will benefit from the new security plan and costs that are going on
The reduction plan of the management department.
The growth in the production of single digits seems to be guaranteed.
The share capital may appreciate at least 10% a year, most of which occur during the upcoming industry recovery.
When combined with 6.
A 1% dividend, the total return is very attractive for such a company.
The risk of loss at the current price is very low, and the return should be very beneficial.
This is a defensive stock, and earnings investors can consider buying and holding in the long run.
Note on diversity: achieving 9-
10% and the best level of diversity, under the high dividend opportunity, we recommend a maximum configuration of 2-
3% of the portfolio is high for individuals
Stock yields like BP and high allocation of up to 5%yield exchange-
Trading products (
Such as etf ETNs, CEFs).
For earnings-dependent investors, diversity often results in more stable dividends, lower downside risks, and lower overall volatility in the portfolio.
I am/We are long BP.
This article was written by myself and expressed my views.
I received no compensation (
In addition to Seeking Alpha).
I have no business relationship with any stock company mentioned in this article.
Custom message
Chat Online 编辑模式下无法使用
Chat Online inputting...