17 Sep 2021
The company once known as British Petroleum (a name revived by President Obama when he wanted to stick it with all the blame for the Deepwater Horizon oil spill) has quietly rebranded itself in the lower case though almost nobody seems to have noticed. As if it is the corporate embodiment of white privilege, bp can only apologise and beg forgiveness for its own existence.
The splendidly named CEO, Bernard Looney (who will soon rebrand himself as Nigel Neurodiverse) has pledged to reinvent the company as a provider of multi energy customer solutions. My opinion is that if he thinks this is going to keep the eco warriors at bay he needs to change his medication, but never mind.
What interests me now is the entertaining contrast between the reinvention rhetoric and the grim reality that bp is probably having a stupendously profitable year due, of course, to the rises in the prices of oil and natural gas. How embarrassing could this get?
I will save you the trouble of ploughing through bp’s 2020 annual report (tagline: “Performing While Transforming”) and take you straight to page 183 where you can get an idea of how the company actually earns its money. Essentially it is 94.5% from oil, oil products and gas.
There was little bp could do in H1 2021 to avoid the surge of cash that resulted from the pop in gas prices in Q1 and the stronger crude oil price in Q2.
In its presentation about Q2 it was careful to say that it expected gas supply to remain tight and refining margins to remain roughly unchanged. In fact the natural gas price (Henry Hub) which averaged $2.9 in Q2 is now (17 September) at $5.37. And industry refining margins which for bp were strong at $13.7 per barrel in Q2 seem to be sharply higher again across the industry.
It seems probable that bp will experience another embarrassingly strong quarter when it reports in late October.
The share price of bp would surely be higher were it not for the armies of Net Zero shamers whose abuse will only increase in volume as the delightful prospect of that orgy of UN narcissistic onanism, COP 26, looms in November.
The dividend, which is around 16p per share, is targeted by bp to rise by a chaste 4% per annum. Even so, at 308p per share, that’s a 5% yield strongly underpinned in a world where seekers of yield are like people trying to eat soup with forks.