People keep trying to breathe life into the BP (LSE: BP) share price. Former CEO Bernard Looney gave it a go by turning the oil giant green.
In 2020, BP pledged to cut oil and gas production by an ambitious 40% by 2030. That didn’t fly. It ended with the shares trading at a significant discount to peers such as Shell and ExxonMobil.
Last week, newish boss Murray Auchincloss did a reverse ferret. He’s now aiming to more than double BP’s market value within five years by returning to fossil fuels.
This FTSE 100 stock is all over the shop
Auchincloss was spurred by the attentions of hedge fund Elliott, which has built a 5% stake in the FTSE 100 oil major.
Options included stripping down the company, dumping net zero, re-listing in New York and possibly all three and more. Others have mooted a tie-up with rival Shell.
All of which keeps the analysts busy, but is this just displacement activity? Should we accept that the BP share price just ain’t all that?
The numbers tell a bleak story. The share price has fallen 5.4% in the past year and is down 20% over two years.
Despite the 2022 energy shock, today’s price of 439p leaves it trading at similar levels to a decade ago. At least investors have got their dividends.
BP looked good value a month or two back, with a price-to-earnings (P/E) of around six. I turned my back, only to discover that the P/E has soared to a staggering 231 times.
On 14 February, BP posted a full-year profit of just $381m, down from $15.24bn in 2023. It made a loss of $1.96bn in Q4.
At least the dividend still holds. The yield stands at 5.6% on a trailing basis and is forecast to hit 6.1% this year. Cover is decent at 1.8.
BP has also been generous with share buybacks. It promised another $1.75bn in Q1 2025. But it looks increasingly like the company will have to borrow to fund them. That’s not sustainable.
I’m just counting on dividends
BP’s strategy reset, announced by Auchincloss on 26 February, marks a dramatic shift. He plans to increase annual spending on oil and gas by about 20% to $10bn while slashing renewables investment.
BP also aims to sell $20bn in assets by 2027, including possibly offloading Castrol and its stake in solar developer Lightsource BP.
It also hopes to slash net debt from $23bn to between $14bn and $18bn by the end of 2027. All of this will no doubt help. But I feel BP still looks like it’s blowing with the wind.
When net zero was all the rage, it went along with that. Now we’re drilling again, BP’s back to oil and gas. That’s no way to run an oil rig.
At least now it’s on home ground, I suppose. But this crisis does mean one thing. BP can’t afford to sit about any longer. As the stakes climb, somebody has to breathe life into the share price.
I hold the stock and I’m not giving up yet. I”ll just sit tight and keep reinvesting my dividends. At some point, all this activity has to lead to something, doesn’t it?
