The BP (LSE: BP) share price has been struggling for so long that many investors may have lost interest in it altogether. Are they missing out on a brilliant buying opportunity?
The last 15 years have certainly been a slog. The Deepwater Horizon disaster in 2010 cast a shadow over BP for years. Climate pressure forced a half-hearted turn towards renewables that pleased nobody, while the pandemic hammered energy demand and forced dividend cuts in 2020 and 2021.
The Russian invasion of Ukraine in 2022 sent BP shares to the stars, but they quickly came back to earth as the West found alternative sources of oil and gas. The controversial departure of CEO Bernard Looney, furious rows over strategy, and sniping from activist investors all added to the sense of drift.
Buybacks and dividends
BP’s final 2024 headline numbers were poor, with profit plunging from $15.2bn in 2023 to just $381m, due to lower refining margins and trading results. Net debt crept up to $23bn.
The latest update, on 4 November, was more positive with profit of $2.21bn, down slightly on the previous quarter’s $2.35bn but ahead of the $2.02bn market forecast.
Chief executive Murray Auchincloss said operations continued to run well with six major oil and gas projects making good progress. He also talked up progress on cost cutting, cash flow, and the balance sheet. Its share buybacks will continue, with another $750m lined up in Q4.
Oil price uncertainty
BP still faces a heap of challenges. The global economy isn’t exactly firing on oil cylinders, plus there are repeated predictions of an oil price glut. Goldman Sachs expects a 2026 average of $53 a barrel for WTI crude oil, while JP Morgan thinks it could slip into the $30s in 2027. Given all that, it’s hard to see why the shares are climbing, and yet they’re up 27% in six months and 19% over a year.
A major new discovery in Brazil helped. Production volumes are rising, costs are being cut, and its $20bn disposal programme is moving along, with roughly $5bn now agreed. That should help whittle down the debt and secure shareholder returns. Investors can also look forward to a solid, rising income, with the dividend forecast to hit 5.43% across 2025 and 5.62% for 2026. Plus buybacks.
Brokers aren’t getting carried away. Consensus forecasts produce a 12-month BP share price target of 502p. That’s roughly 9% above today’s 460p. Add dividends and total returns could approach 15%. I’d make do with that.
I wouldn’t call it a textbook recovery story and I’m not expecting the shares to explode. The renewables transition remains a long-term threat. Still, I’m more optimistic than I’ve been for a while. Investors might consider buying, provided they understand the risks as well as the rewards. However, I can see more predictable dividend stocks on the FTSE 100 today, and some have higher yields too. I’ll buy them first.
