The ASX broke a two-day loss streak today, gaining 0.47% or 36.00 points to 7,617.60 and is virtually unchanged for the last 52-weeks to-date.
The boost to the index is mostly due to rebounding lithium stocks, which are making up some lost ground after the price of lithium fell an incredible 80% in 2023.
Liontown Resources (ASX:LTR) gained 6.33%, Pilbara Minerals 4.88% and Core Lithium 3.89%.
Other miners also gained – BHP rose 1.11%, Fortescue 1.02% and Rio Tinto 0.80%.
Santos was an exception, as the company failed to reach an agreement in merger talks with Woodside Energy and fell 5.40% today – Woodside, conversely, gained 0.71%.
The Utilities, Real Estate and Materials sectors all rose between 1.74% and 1.06%, leading the market up and outweighing the losses in Energy (-0.95%) and Consumer Discretionary (-0.72%).
BP’share price soars
Stockbroking firm XTB research director Kathleen Brooks explains BP’s recent stock price surge following its earnings report, and why agitation from “activist investor” Bluebell Capital Partners may have pressured BP into putting its low-carbon ventures on the back burner.
“BP’s share price is up by more than 6% at the start of trading on Tuesday as the company reported stronger than expected Q4 profit levels, which has boosted sentiment towards the stock,” Brooks wrote.
“Although 2023 full-year profits were shy of estimates, the strong Q4 performance suggests that the company gathered steam at the end of last year, which is a good backdrop for 2024’s performance.
“There was good news on gas trading and its profitable convenience line, which saw gross margins soar, the company also jumped on the AI bandwagon.”
BP the bargain stock?
“All in, this mix has been welcomed by investors, and the stock price may also have been given a boost by activist investor Bluebell Capital Partners who said at the weekend that it believes BP’s share price is 50% undervalued compared to its peers,” Brooks continued.
“Reading BP’s financial market update is like a long list of excuses about why it couldn’t repeat 2022’s performance.
“However, false modesty aside, there was something for investors to like about this report. It posted underlying replacement cost profits of $13.8 billion for the full year 2023, vs. $27.2 billion for 2022, which was a bumper year for commodity flows and 2023’s profit level was higher than 2019 when profits were $9.9 billion.
“Cash flow levels have, unsurprisingly, fallen alongside profit levels, but BP remains flush – it reported $32 billion of operating cash flow for last year and over $7 billion in surplus cash flow.”
Dividend and buyback boost attracts investors
“BP delivered a 10% increase in its dividend in Q4 2023 compared with the year before, at 7.27 cents, this had been 6.61 cents in Q4 2022,” Brooks explained.
“It also announced a $1.75 billion share buyback. BP’s reliable dividend is rising again after falling sharply during the pandemic; however, it is not yet back at the pre-pandemic highs of 10.5 cents.
“Investors will be wondering when it will return to these levels, especially now some of the tech giants like Meta are also offering dividends and mega share buybacks, that make BP’s share buyback look like small change.
“However, BP has pledged to use 80% of its surplus cash flow on returning funds to investors, so this opens the door to the dividend returning to prepandemic levels in the coming quarters, which is also enticing for investors.”
The forward outlook
“Q4’s results saw lower refining margins, however, this was boosted by stronger gas trading revenues, which also boosted Shell’s profits, as oil trading weighed on profit levels. The forward outlook was in line with expectations,” Brooks continued.
“The oil major expects to deploy capital expenditure of $16 billion per year for 2024 and 2025, which is in the middle of its prior guidance of $14-18 billion.
“It also announced that it is planning to buyback shares worth $14 billion n through to 2025, as it commits to returning 80% of surplus cash flow to shareholders.
“Surplus cash flow was $7.8 billion for 2023, so the $14 billion figure could be conservative and there may be room for them to increase this assuming there is no nasty profit dip in the coming quarters.
BP: back to focusing on hydrocarbons?
“BP announced its new Seagull project, which will add 15,000 barrels of oil per day by 2025. It’s planning to expand its Gulf of Mexico projects, and it was awarded a new block in the Santos Salt Basin in Brazil,” Brooks wrote.
“Interestingly, BP put its hydrocarbon updates well ahead of its low carbon updates in this earnings report.
“This could be a nod to activist investor Bluebell Capital Partners, who have pressured BP to slow its commitment to reducing oil and gas production levels as part of a greener future.
“Bluebell also believes that BP’s share price is 50% undervalued, so it’s no wonder BP’s c-suite has played down their low carbon future.”
BP the coffee company
“BP is not only pumping oil out of the ground, but it’s also pumping coffee.
“Its convenience store business is a behemoth that should not be underestimated, it delivered a record convenience store gross margin that was 9% for 2023. This is part of the business that should not be ignored and BP sells more than 150 million cups of coffee each year at its retail sites.
“It’s expanding its electric vehicle charging business in Spain and Portugal with a JV with Iberdola and it plans to invest EUR 1 billion by 2025 and install 5,000 fast charging points.
BP jumps on AI bandwagon
“BP has also jumped on the AI bandwagon. BP was a launch partner for Microsoft’s CoPilot for its Microsoft 365 product, and it plans to expand the use of this generative AI product across its sites.
“We doubt this led to BP’s share price rise, but it keeps BP on trend.”
The Five at Five
Premier1 Lithium shares rise on first day under new name; secures heritage clearances for Abbotts North targets
Premier1 Lithium Ltd (ASX:PLC) shares were trading about 8% higher intra-day at 4.2 cents after securing heritage clearances for the first stage of the exploration drilling program at its Abbotts North Project near Meekatharra in Western Australia.
Stelar Metals exploration propelled by high-grade lithium hit in first drilling at Trident
Stelar Metals Ltd (ASX:SLB) has fielded promising intersections from its initial reverse circulation (RC) drilling program at the Trident Lithium Project near Broken Hill in Far West NSW.
Infinity Lithium Corporation confirms recoveries above 90% for San José lithium feedstock
Infinity Lithium Corporation Ltd (ASX:INF) has completed a comprehensive locked cycle test (LCT) work program with the aid of Simulus Group Laboratories, confirming "exceptional" lithium recoveries of more than 90%.
Piedmont Lithium (ASX:PLL, OTC:PLLTL) targeting cost-efficient lithium mining on two continents with NAL and Ewoyaa investments
Pivotal player in the US electric vehicle (EV) supply chain Piedmont Lithium (ASX:PLL, OTC:PLLTL) shared a comprehensive update on its corporate and project developments.
Volt Resources progresses bid for non-dilutive US Government funding
Volt Resources Ltd (ASX:VRC, OTC:VLTRF) — an established graphite producer and natural graphite anode developer — continues to make progress in its bid to secure non-dilutive funding.
On your six
RBA remains hawkish on interest rates in effort to control inflation
The Reserve Bank of Australia on Tuesday followed the nigh unanimous consensus of analysts and held the official cash rate at 4.35%. It was the first meeting of the RBA in its new format, implemented by the Federal Government last year following a long overdue review into the central bank’s policies and procedures.
Strickland Metals discovers significant 2.6-kilometre gold trend
Strickland Metals Ltd (ASX:STK) CEO Andrew Bray sits down with Proactive’s Jonathan Jackson to discuss a turnaround at the Marwari prospect, part of the Yandal Gold Project.