5 Ways BP plc Could Make You Rich

BP plc (LON: BP) says it wants to become more shareholder friendly. Is now the time to forgive and forget?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

bp

BP (LSE: BP) (NYSE: BP.US) has been in deep water for years but the misery can’t last forever. Here are five ways it could make you rich.

1) By continuing its fragile recovery

BP’s share price is still down nearly 27% since 20 April 2010, almost four years ago, when news of the fatal Deepwater Horizon oil spill broke. Oil production is down 17% since then. BP is still in conflict with the federal authorities. The US Department of Justice is keen to retain the ban on BP competing for government contracts. All of this will take time to settle, especially with BP in a more combative mood. But the pain won’t last forever. If you want to get rich on the stock, you need to buy while trouble is still its business.

2) Finally getting out of Deepwater

The next leg of the Gulf of Mexico oil spill is fast approaching. District Judge Carl Barbier of New Orleans still has to rule on whether BP was guilty of ‘gross negligence’, which would open it to another $18 billion of penalties, or simple ‘negligence’. If the ruling goes against BP, brace yourself for another share price plunge/buying opportunity. This won’t be the end of it, because state finds and federal penalties could also follow, but the bulk of the pain may soon be over. 

3) By continuing its exploration success

BP has just enjoyed its best year in exploration in a decade. Last year, it completed 17 exploration wells, which resulted in seven discoveries, a healthy hit rate. BP also started three major upstream projects last year, the Chirag Oil project in Azerbaijan began production on 28 January, and another five are set to follow this year. Chief executive Bob Dudley says 2013 is the year BP will start to build momentum, and has set an ambitious operating cash flow target of £30 billion, up from £21 billion in 2013. He was also bullish about BP’s risky decision to take a near 20% stake in Rosneft, controlled by the Kremlin. It is good to hear some optimism, after the 22% drop in full-year profits. The future may be brighter.

4) Because it is meaner and leaner than it was

BP has slimmed down considerably since Deepwater. The smaller, tighter business makes it easier to manage risks, Dudley says. It has divested $38 billion of assets, to fund its legal bills and clean-up costs. The sale of its interest in TNK-BP has helped fund $6.8 billion worth of share buybacks, with another $1.2 billion to come. BP is now lining up another £10 billion of divestments before the end of 2015, with most of the money earmarked for further buybacks.

5) By becoming even more shareholder friendly

BP has praised its patient shareholders in the past, and wants to reward them by becoming even more shareholder friendly. It now yields 4.4%, and that is forecast to hit 5.1% by December, then 5.3% by December 2015. In the longer run, dividends are the surest route to riches. And at a forecast price/earnings ratio of nine times earnings for December, you aren’t overpaying for the stock either. The share price has gone nowhere for the past year, but that will change one day. If you want BP to be your wealthy friend, now may be a good time to renew your acquaintance.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

> Harvey owns shares in BP

More on Investing Articles

Investing Articles

2 mouthwatering FTSE growth stocks I’d buy and hold for 10 years

Growth stocks purchased today could be the gateway to many years of capital growth and returns. Here are two picks…

Read more »

Investing Articles

Can the IAG share price really be as dirt cheap as it looks?

While most shares have recovered since the Covid days, the IAG share price is staying stuck to rock bottom. Surely…

Read more »

Investing Articles

BAE Systems shares are flying! Have I missed the boat?

Sumayya Mansoor looks into whether or not BAE Systems shares are still a good buy for her portfolio after the…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

1 heavyweight FTSE 100 share I’d buy as London retakes its crown

Some Footsie firms are extremely large, but that doesn't mean they couldn't get even bigger. Here's one such FTSE 100…

Read more »

Investing Articles

I’d buy 5,127 National Grid shares to generate £250 of monthly passive income

With a dividend yield of 6.5%, Muhammad Cheema takes a look at how National Grid shares can generate a healthy…

Read more »

Investing Articles

The FTSE 100’s newest member looks like a no-brainer to me!

This Fool explains why she sees the newest member of the FTSE 100 as a great opportunity after its recent…

Read more »

Investing Articles

Empty Stocks and Shares ISA? Here’s how I’d start earning a second income from scratch

Like the thought of earning extra cash tax free? Our writer explains what he'd do to begin earning passive income…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

No savings at 25? I’d start by investing £3k in these 3 red-hot FTSE 100 shares

Harvey Jones thinks these three FTSE 100 stocks would be a great way to kickstart a portfolio of UK shares.…

Read more »