Next 5 years or so, for oil and gas majors

[scotview]

What do you think the total returns for oil majors will be in the next few years. Are there any of them that present a better business case than others or are they all doomed ?

Thanks in advance.

[Bubblesofearth]

Oil will be back over $100 in 5 years time so expect decent returns from the whole sector.

BoE

[dspp]

If it helps I am significantly overweight in both Shell and BP, and skewed about 2:1 in favour of Shell.

(you can take that as a sign to go elsewhere !)

Of the supermajors I think both Shell and BP recognise the issues more than their peers, and are seeking to do something about it in a balanced and rational way. I expect them to be slow to get outcomes, and thereby be fairly exposed to the next upcycle in oil prices, yet I also expect them to make significant progress on the decarbonisation front. Both have been at that for decades and know the score. I tend to prefer the culture of Shell to that of BP, hence my skew. But events could pan out to show my error in the cultural respect, that can be how the dice roll.

In contrast the US majors are trying to put their head in the sands, and skew the game. And the other majors are so much controlled by various individual nations that it is a crapshoot how they go.

It is all very difficult. I missed DONG's pivot, so that is one I got wrong - they went faster than I thought they could.

Now my TSLA exposure outweighs my oil exposure, and is much more profitable. Since my oil exposure was purchased in 2015 it is in the money still, after allowing for dividends.

I think there will be one more substantial oil upcycle. That is the basis of my positioning. I could well be wrong, in either direction.

all imho.

regards, dspp

[Dod101]

dspp can be relied upon for current speak. What he is saying I think is that Shell probably has a better grasp on the future than many others do. In that respect I would agree.

Shell's collegiate culture virtually leads the world I would say and I would trust them. Culture is something that grows from the ground up and is very difficult to change for good or ill. Most family owned businesses have it but for PLCs it is difficult to maintain.

As for Shell, I think the Dutch and we Brits have a lot in common. Think back to the Empire. The Brits suddenly turned up at the right time in place like Malacca, Ceylon ( as it was the called) and so on. We both understand business. And I have not yet mentioned Unilever!

Dod

[dspp]

If it helps I am significantly overweight in both Shell and BP, and skewed about 2:1 in favour of Shell.

(you can take that as a sign to go elsewhere !)

Of the supermajors I think both Shell and BP recognise the issues more than their peers, and are seeking to do something about it in a balanced and rational way. I expect them to be slow to get outcomes, and thereby be fairly exposed to the next upcycle in oil prices, yet I also expect them to make significant progress on the decarbonisation front. Both have been at that for decades and know the score. I tend to prefer the culture of Shell to that of BP, hence my skew. But events could pan out to show my error in the cultural respect, that can be how the dice roll.

In contrast the US majors are trying to put their head in the sands, and skew the game. And the other majors are so much controlled by various individual nations that it is a crapshoot how they go.

It is all very difficult. I missed DONG's pivot, so that is one I got wrong - they went faster than I thought they could.

Now my TSLA exposure outweighs my oil exposure, and is much more profitable. Since my oil exposure was purchased in 2015 it is in the money still, after allowing for dividends.

I think there will be one more substantial oil upcycle. That is the basis of my positioning. I could well be wrong, in either direction.

all imho.

regards, dspp

For info I took the decision to sell most of my RDSB and BP holdings today. I am still exposed to the sector through index funds, but I am no longer overweighted. I took the view that TSLA's roadmap is such that, even if the other auto companies do not follow them, it requires an extremely quick 'fast-follower' response from the oil majors. And I cannot see that happening at the necessary speed.

To take an example I have previously pointed out that worldwide Shell has about 40,000 retail outlets and Tesla only 2,000. If Tesla hits 20mln vehicles/yr mfg rate by 2030, then by then there would be 63mln Teslas on the world's roads. At about 500 Teslas per Tesla supercharger station (the current ratio) that is 126,000 Tesla supercharger stations. Now for a whole load of reasons I won't go into here I don't expect that to be the actual Tesla number, but I do expect it to be closer to 40,000, and I don't see Shell or BP acting the way they need to now if they are to meet that challenge. Similarly most of the worlds fossil fuel power stations will not meet their O&M costs at the $50/kWh for storage that Tesla will be at by then. I really cannot see either RDSB or BP being able to pivot fast enough to cope with that, and I have considerable respect for my peers who are (still) in those companies, as they simply do not have the cultural agility*. By 2025 I expect most of the world's traditional auto companies who are on the dino-juice pathway to be bleeding red, and I think that the O&G majors will be quite close behind them. This is going faster than I thought it could, which is to say as fast as I hoped it might.

I may of course be wrong, in which case I will likely have missed out on the fabled one last oil price megacycle. I'm prepared to take that risk.

regards, dspp

(* it will take massive wrenching dislocation for them to act at the necessary speed: can you imagine Shell buying out Panasonic and increasing it 20x in 5yrs; putting 10 superchargers on every forecourt; and starting an auto business from scratch; oh and maybe putting in a few TW of wind and solar. I can't, but that is what it would take Shell to respond at the necessary scale. It is too late for them to do this unless they were to take on a completely new leadership cadre, and even then their mkt caps and shareholder base can't support it.)

[Dod101]

Didn't take dspp long to change his mind then. Ah well, we'll see.

Dod

[richfool]

I would like to now who (which companies) are building the huge number of recharging points particularly in the UK?

[bluedonkey]

I think it's a question of which oil major will be the least bad investment. I sold my direct holdings of BP and Shell in early June 2020.

[Urbandreamer]

I would like to now who (which companies) are building the huge number of recharging points particularly in the UK?

Who currently is or who has? Tesla has quite a lot and seem to be installing more.
https://www.tesla.com/en_GB/findus/list ... edirect=no
Guess who else is?
https://www.shell.co.uk/media/2019-medi ... court.html
You might note from the press link that they bought a charging company back in 2017.
That side of their business though is too small to mention in their finance report.

If you wanted to know who makes the chargers installed by such, then it's often the big names like Siemens and Bosch.

Ps, I hold Shell.

[richfool]

I would like to now who (which companies) are building the huge number of recharging points particularly in the UK?

Who currently is or who has? Tesla has quite a lot and seem to be installing more.
https://www.tesla.com/en_GB/findus/list ... edirect=no
Guess who else is?
https://www.shell.co.uk/media/2019-medi ... court.html
You might note from the press link that they bought a charging company back in 2017.
That side of their business though is too small to mention in their finance report.

If you wanted to know who makes the chargers installed by such, then it's often the big names like Siemens and Bosch.

Ps, I hold Shell.

I also found these, which includes BP, Shell and edf.

https://roboticsandautomationnews.com/2 ... ies/22138/

https://www.edfenergy.com/electric-cars/charging-points

[dspp]

Didn't take dspp long to change his mind then. Ah well, we'll see.

Dod

Dod,
I'd been overweight for 4-years. These holdings date from the 2016 slump, though over time some RDSB gains were rinsed into BP. Other gains went into HUR but that is a different matter

I would like to now who (which companies) are building the huge number of recharging points particularly in the UK?

Who currently is or who has? Tesla has quite a lot and seem to be installing more.
https://www.tesla.com/en_GB/findus/list ... edirect=no
Guess who else is?
https://www.shell.co.uk/media/2019-medi ... court.html
You might note from the press link that they bought a charging company back in 2017.
That side of their business though is too small to mention in their finance report.

If you wanted to know who makes the chargers installed by such, then it's often the big names like Siemens and Bosch.

Ps, I hold Shell.

Urbandreamer,
Indeed both Shell and BP have been dipping their toe in the water. So far they have not got a lot to show for it. And they are expensive with little internal vertical integration and no economies of scale (vs TSLA). And the user experience is poor by comparison to TSLA if you talk to users / read the reviews. And the Shell/BP business model means that they have to run their network for profit, whereas the TSLA business model means they only need to run their network for breakeven - it is not a fair fight !

I would really like Shell and BP to get this right, but decided that the risks were too great that they won't, especially given the pretty game-changing data in TSLA's presentation yesterday. If the omens change then I will reassess of course, and clearly my doing this is a good indicator to do the reverse.

regards, dspp

[Dod101]

Thanks dspp. I have a (now small!) holding in Shell and will most likely just keep it and see how it goes. I know very little of the much bigger picture so cannot sensibly make the sort of judgement that you do, and frankly so many things can go wrong/change that as long as I am getting a modest dividend I will just keep it and see how it goes.

Dod

[Urbandreamer]

Urbandreamer,
Indeed both Shell and BP have been dipping their toe in the water. So far they have not got a lot to show for it. And they are expensive with little internal vertical integration and no economies of scale (vs TSLA). And the user experience is poor by comparison to TSLA if you talk to users / read the reviews. And the Shell/BP business model means that they have to run their network for profit, whereas the TSLA business model means they only need to run their network for breakeven - it is not a fair fight !

I would really like Shell and BP to get this right, but decided that the risks were too great that they won't, especially given the pretty game-changing data in TSLA's presentation yesterday. If the omens change then I will reassess of course, and clearly my doing this is a good indicator to do the reverse.

regards, dspp

I too would like Shell to get it right. As you say they have both been dipping their toes in the water forever.

I use to like BP for the fact. However many things have caused me to question the corporate culture since they ceased to be BP and became BP-AMACO, shortly followed by the reduction in the name to BP or as the Americans called the combined UK-US company British Petroleum. Bad practice lead to pollution in their back yard. Ignoring refinery disasters etc. I should say that I have some interest in industrial "safety".

It may be wishful thinking, but the likes of both might have significant money to invest as the world turns. Both have cut the amount they pay out and neither seems to wish to manage a decline but rather seek alternative income streams.

I don't hold TSLA directly, but I do hold SMT, which has more that most IT's would be comfortable with.

TBH I don't think that we can compare the likes of Shell with Tesla, other than to say that they are both installing charging stations. Shell probably makes far more money, but Tesla is far more invested in the future at the moment.

[Dod101]

I too hold Scottish Mortgage but I would never compare Shell to Tesla. And I do not for one minute believe that Shell is trying to manage a decline nor would they wish to.

Much over thinking here I believe.

Dod

[dspp]

I too hold Scottish Mortgage but I would never compare Shell to Tesla. And I do not for one minute believe that Shell is trying to manage a decline nor would they wish to.

Much over thinking here I believe.

Dod

Urbandreamer,
Indeed both Shell and BP have been dipping their toe in the water. So far they have not got a lot to show for it. And they are expensive with little internal vertical integration and no economies of scale (vs TSLA). And the user experience is poor by comparison to TSLA if you talk to users / read the reviews. And the Shell/BP business model means that they have to run their network for profit, whereas the TSLA business model means they only need to run their network for breakeven - it is not a fair fight !

I would really like Shell and BP to get this right, but decided that the risks were too great that they won't, especially given the pretty game-changing data in TSLA's presentation yesterday. If the omens change then I will reassess of course, and clearly my doing this is a good indicator to do the reverse.

regards, dspp

I too would like Shell to get it right. As you say they have both been dipping their toes in the water forever.....TBH I don't think that we can compare the likes of Shell with Tesla, other than to say that they are both installing charging stations. Shell probably makes far more money, but Tesla is far more invested in the future at the moment.

A long time ago in the very early 90s - back when I was inside Shell - I made the point that Shell said itself it was an energy company. And that Shell itself acknowledged that the trend was decarbonisation. And that the the logical outcome of this was renewables. And I (and others) pushed to move faster and more directly in that direction using Shell's own core competencies to accelerate the transition. We were very literally told to shut up and stop working (even in our own time) on this stuff, and that message came very literally from the top.

So .... fast forwards thirty years and I do think we have to directly compare Shell/BP/etc with TSLA. Energy is stationary and mobility, and Tesla is tackling both aspects of that head on with utter sincerity and simplicity. If the oil majors et al do not identify a defensible niche, or get after the main problem set, then all that will be left for them is decline. It will not be good enough for them to say "we are not comparable".

Regards, dspp

[absolutezero]

I too hold Scottish Mortgage but I would never compare Shell to Tesla. And I do not for one minute believe that Shell is trying to manage a decline nor would they wish to.

Much over thinking here I believe.

Dod

The businesses of BP and Shell will evolve as time goes on.
Less oil and more 'other'.

I'm leaving them to it. They don't want to go bust.

As you say - too much over thinking going on.

[88V8]

Comment today from Citi after a management briefing :

'Citi's Alastair Symekept his 'sell' recommendation and target SP of £11.80.
LNG prices and refining margins are very low and Shell has had problems managing full utilisation of upstream assets because of Covid-19 and weather related downtime, Syme said.
Shell has promised to respond with "Project Reshape' which is expected in early 2021 and is billed as a fundamental rethink about how to operate during the transition to cleaner energy, Citi said. Shell acknowledges that many new energy companies are smaller, faster and more digital.
"The share price chart of RDS shows you that all is not well," Syme wrote in a note to clients. "We did not get a sense of how Project Reshape will be measured, ie what KPIs will be given to the market."

As dspp has said elsewhere, all a bit slow and ponderous.

V8 (holds Shell)