The Covid-19 pandemic has caused a lot of businesses to struggle. Even though I primarily think of the travel and tourism industry, others have been hit hard. Commodities companies such as BP (LSE:BP) have seen headwinds from several angles. Lower energy prices, a lack of demand for refined products and the need to restructure are just some of the reasons. As a result, the BP share price is down 43% over the past 12 months, and is down again today on fresh news.
2020 results
This morning saw the release of the 2020 results for BP. It didn’t make for great reading. The full-year reported loss was $20.3bn, compared to a profit of $4bn in 2019. Net debt stands at $39bn, a hefty number. The plan is to reduce that down to $35bn by the end of this year or early 2022. The restructuring is seeing job cuts of 10,000 people, costing around $1.4bn in restructuring costs.
It comes as no surprise then that the BP share price is down following those announcements. Yet there were some positive notes in the report. Q4 profit came in at $1.4bn, a bounce back from the loss of $0.5bn of Q3. This did include proceeds from a business sale, so was inflated somewhat. However, the business sale is part of the restructuring, so I don’t hold this against BP.
The other two positives I gleaned from reading the report could give the BP share price a longer-term boost. Firstly, a dividend was announced. Secondly, the CEO statement finished with an upbeat message that “we expect much better days ahead for all of us in 2021”. I think that this optimism could be well-founded, and so am keeping a close eye on the BP share price as the week progresses.
BP shares in my ISA
Late last year, the BP share price fell to levels not seen since the turn of the century. At the moment, it trades around 259p. There are plenty of issues I mentioned in my introduction as to why it’s this low. However, I don’t see any of those drags being long-term for BP. The pandemic eventually will subside thanks to vaccines. The oil price should move higher as demand for it returns from aviation and other industries. In short, I think this is a short-term blip.
With this in mind, I feel the share price returns in coming years could be substantial. That’s why I’d make sure I hold the stock within my Stocks and Shares ISA. This wrapper allows me to realise any profits net of capital gains tax. If the BP share price recovered eventually to 2019 levels, I’d be very thankful for not having to pay capital gains on it!
The risk to this idea is that the economic drag from the pandemic continues for longer than I expect. In this case, the BP share price could remain suppressed for longer. But as I’m happy to buy and hold the stock for the long term, I don’t mind this too much.
