I have a long position in BP so wanted to stress test their updated guidance following their announcement of divesting from Rosneft. Sharing here for feedback and in case it is of interest to others…
All data is FY 2021 and taken from their filings as well as their investor relations website. Guidance is taken from their press release 2/27/2022.
Cashflow from operations was $23.6BN, of that $2.7BN came from Rosneft so 2021 was $20.9BN excluding Rosneft.
Average realizations for the year were $63.60 (Liquids), $5.11 (Nat Gas) and $33.75 (Total Hydocarbon's BOE).
Guidance given:
Dividends to increase 4% for 2022, so going from $4.6BN to $4.78BN.
Capex expected to be $14BN to $15BN, lets use $15BN.
Divesting (excluding anything from Rosneft) $2BN to $3BN, lets use $2BN.
Surplus cash (after dividends and capex) to be shared 60% on buybacks and 40% on debt reduction.
Expect to be able to do $4BN in buybacks even at $60 per barrel.
***my math*** if $4BN for backbacks at 60% surplus cash then would mean $2.7BN for debt reduction at 40%.
Total cashflow required for all of the above is $26.48BN, less the divesting gives $24.48BN.
So BP needs to expand is Cashflow from operations from $20.9NB (2021 excl Rosneft) to $24.48BN, which is a 17% increase. As I expect average realizations to be at least 30% up in 2022 and possibly way higher I am concluding that BP's 2022 target is more than achievable.
In addition, anything they can get from their divesture of Rosneft will be a cash benefit, whereas the market may (incorrectly in my opinion) get hung up on next earnings as Rosneft can no longer be considered equity so there is an $11BN hit for historical foreign exchange losses and different of Rosneft fair value as of March 31st and carrying value of $14BN.
Did I miss anything or does anyone have any differing views?
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