Wacky,I was talking about an on market share buyback.Re your...

Wacky,
I was talking about an on market share buyback.

Re your comment:
"The point both of you are missing is that if a company issues more shares is this manipulating the share price?"

This is not manipulating the SP but it does affect it depending on what price the Capital raising is at.


I think the bit you are missing in your analysis is that by year 3 you have bought back 271M shares which would cost approx $400M (as the SP will go up as per my previous analysis) and yet you keep the earnings at $100M.
It may well be the earnings increase each year offsets the lost Interest from the surplus cash but you are not showing a true like for like comparison unless you show what the earnings would be like in year 3 if they didn't do a buyback.


In simple terms the market currently values BPT at $1.7B based on 1.27B shares @ $1.335.

The $1.7B valuation is a mixture of Oil and Gas Reserves, future projects, Net Cash, quality of management and political risk.
Each asset is valued using NPV analysis.

What you are suggesting with a Buyback over 3 years is to spend approx $400M buying back 271M shares. I am asuming av buyback price of $1.50 as the hedge funds and shorts always push the price up when buybacks are announced.

The impact of this buyback will be to reduce the value of the company assets by $400M to $1.3B

You will end up with a $1.3B valuation and approx 1B shares (1.27B - .27B)which would give a SP of $1.30 once the buyback is over.

So at the end of the day the balance sheet is a lot weaker and the SP has hardly changed. Yes there would be a temporary increase in the SP short term but long term it will suffer.

Beach became a great company by finding undervalued assets and aquiring them at below market prices.
By doing a buyback you are massively reducing the companies ability to do what they do best which is grow through very smart asset aquisitions.

As gassad previously said there are a lot of Junior Oil companies in trouble which means many assets will come onto the market over the next 3 years at bargin prices either from farmins or forced sales.
Beach is in a great position to get many of these deals but a share buyback would kill most of these deals off.

I think we both agree Beach is a great company that is very well managed and undervalued.
I guess we will just have to disagree on share Buybacks.