Re-visiting BP – Rosneft, buybacks and Overbought

BP’s stock price has risen 51% in the past year.

Days away from the anniversary of Russia’s invasion of Ukraine and 11 months since BP I wrote this note……

….when BP said they promise to sell their stake in Rosneft……it’s another investing lesson in separating reality and media noise from corporate spin and intent.

To my understanding, BP still owns its 19.75% stake in Rosneft and the BP recently received dividends as a result of this holding to the tune of GBP 580 million.

This is twice the amount that the UK Government has provided in humanitarian aid to the Ukraine (while its military aid has been +$2 billion).

Today, BP’s share price is “the most overbought” (on a Monthly basis) than anytime over the past 20 years.

I feel that it would be advisable if BP gets a wriggle on and keeps it promise to sell its Rosneft stake.

So far, from a capital market’s perspective, BP’s management has done a stellar job.

On a capital management front, why would you use fortuitous profits and gains to buy your own shares at these extreme highs and veil it as a ‘return to shareholders’.

Government confiscation of retained earnings (taxes) and other things come to mind for their reasoning.

But I find it a lazy decision to embark on share buybacks, such as the $2.5 billion announced in November 2022. I can see why they have decided so but there are other things they can do.

February 14, 2023
by Rob Zdravevski
rob@karriasset.com.au