The BP (LSE: BP.) share price has sparked into life on a couple of occasions in recent weeks, but each time the flame quickly died down.
One moment of excitement came in April when tensions between Iran and Israel sent the oil price climbing towards $78 a barrel. Now it’s back below $68, and BP shares are down too.
BP shares also jumped after speculation of a £200bn merger with FTSE 100 rival Shell. But Shell denied this, and things settled down again.
So it’s back to reality for BP, and it isn’t particularly pretty. Its Q1 2025 results, published on 29 April, were poor. Net income fell 70% to $687m year-on-year, while operating cash flow dropped sharply, from $5bn to $2.8bn. Underlying replacement cost profit, which BP prefers to use as its benchmark, more than halved to $1.38bn. Weaker refining margins, poor trading results and “market volatility” were all blamed.
Green retreat continues
BP’s Net Zero shift is history, as CEO Murray Auchincloss returns to focus on oil and gas. He’s also promised a more disciplined approach to capital spending. Divestments are now expected to hit $4bn.
Its dividend held steady at $0.08 per share in Q1. That currently translates to a trailing yield of 6.33%, which looks attractive. Sadly, that’s largely down to a 23% slide in the share price over the last 12 months.
The 2025 full-year dividend is forecast to rise to 24.43p, then grow 4.5% to 25.52p in 2026 and by 5.4% to 26.91p in 2027. If that plays out, the 2027 forward yield would be just over 7%, based on today’s price of 382p.
That would be a solid income return, assuming it’s maintained. Dividend cover for 2025 is forecast at just 1.3 times earnings though, well below the level that typically reassures long-term investors. The board has been generous with share buybacks paying $7bn last year, but that’s expected to fall to just $3bn this year. BP isn’t as flush as it was.
Modest recovery predicted
Right now, analysts expect only a modest recovery. According to the latest forecasts, the median 12-month share price target is just under 427p. That would deliver a capital gain of around 11.6%. Add the forward yield of 6.9%, and the total return could hit 18.5% in the next year. I’d be happy with that, if it happens.
In my view, that’s a big ‘if’. With the global economy still on shaky ground and oil supply looking relatively stable, it’s hard to feel confident in the numbers.
Of the 32 analysts offering ratings, seven name it a Strong Buy and five say Buy. But by far the majority view, held by 18, is a Hold. That cautious consensus feels about right to me.
I bought late last year, and I’m currently sitting on a paper loss of around 10%. I’m going to Hold too, but I have no intention of adding to my stake now. I think investors need to think carefully before they consider buying BP today, as it’s still a long way from firing on all cylinders. There are far more exciting opportunities on the FTSE today, I feel.
