For months, the BP (LSE: BP) share price has been inching its way back toward the 500p mark. Since April, the stock’s jumped 28% — a solid rally by most measures.
Still, it’s not quite back to full strength, trading 10% below its February high of 472p. The performance has been subdued by stubbornly flat oil prices, but the company’s latest moves could point to renewed growth.
What’s been driving the recovery?
BP’s been shifting gears in a way that traditionalists will probably welcome. The company’s started funnelling more resources back into oil and gas while scaling back its more ambitious renewable spending.
It’s not a full retreat from green energy, but the balance of focus has clearly shifted.
In August, BP unveiled its largest oil and gas discovery in 25 years off the coast of Brazil — a find that could meaningfully boost long-term production. Then, earlier this month, it signed a memorandum of understanding (MoU) with Egypt to explore drilling opportunities in the Mediterranean Sea – aligning with the county’s broader push to accelerate natural gas development.
These initiatives could help BP hit its target of producing 2.3m-2.5m barrels of oil equivalent a day by 2030.
On top of that, it recently signed a three-year liquefied natural gas purchase agreement with BOTAS, Turkey’s state energy company. Under the deal, Turkey will receive 1.6bn cubic metres of LNG annually, an important factor in ensuring supply during colder months.
A look at the numbers
Financially, BP appears to be in decent shape. Analysts expect earnings to grow by around 28.3% a year over the next three years. Its forward price-to-earnings (P/E) ratio of 12.68 comes in just below the industry average, which suggests the stock isn’t overly stretched.
Based on forecast cash flows, the shares even look undervalued by as much as 52%. For investors who like to consider value metrics, that’s not a bad signal.
But risks remain. Oil spills have haunted BP’s past and any future incident could instantly derail progress. Exploratory drilling is also notoriously expensive. Should the Egyptian wells turn out to be less productive than hoped, the venture could weigh on profits rather than boost them.
That’s the nature of oil exploration — big wins balanced against potentially costly misses.
Dividends: a steady draw
Even if the share price doesn’t continue its current climb, BP’s dividend has always been a key attraction. Right now, the yield sits at 5.8% and the company has delivered uninterrupted payments for more than two decades. Coverage by earnings is a little thin at the moment, but projected profit growth could fix that.
Analysts expect the yield to tick up to 6.1% in 2026 and 6.3% in 2027, which should appeal to income-focused investors.
My verdict
BP’s shift back toward oil and gas might frustrate some sustainability advocates, but the strategy looks pragmatic given current market conditions. The new drilling agreements and strong earnings forecasts suggest there’s room for further recovery.
Yes, there are risks that can’t be ignored — oil price volatility, exploration setbacks and environmental hazards are always on the table. But for those willing to weigh those factors carefully, I think BP’s new strategy combined with its dividend strength makes it a strong stock to consider as 2025 heads into its final quarter.
