I added BP (LSE: BP) shares to my Self-Invested Personal Pension (SIPP) in September and November 2024, and again in January 2025, and I often wish I hadn’t. This is a company that looks perpetually in a mess. Strategy uncertain, leadership unstable, and operating in one of the most controversial industries on the planet. What was I thinking?
I bought because the shares looked cheap after a prolonged battering. Some of that was self-inflicted, as BP’s push into renewables backfired and forced an awkward retreat. Some of it wasn’t. Oil prices surged after Russia invaded Ukraine in 2022, then fell back as Europe weaned itself off Russian gas and secured alternative supplies.
Cyclical FTSE 100 stock
So while the BP share price is flat over three years, it’s still up around 90% over five years. Over the last 12 months it’s up 11%, with dividends on top.
The energy sector is famously cyclical. It makes more sense to get in near the bottom rather than the top, although it can feel uncomfortable at the time. That’s another reason I dived in when I did. Looking back, I haven’t done too badly.
My average purchase price is 414p, and the shares now trade at around 478p. That’s a gain of more than 15%. I’ve already received five dividends, lifting my total return towards 25%. Not bad, given this has been a difficult spell for the energy sector in general and BP in particular.
The company has lost two chief executives (Bernard Looney and Murray Auchincloss) in quick succession, and is trying to find its feet under a new boss, Meg O’Neill. As the first external appointment in BP’s 116-year history, her arrival signals a clear attempt at a reset.
Much still hinges on the oil price. Recently it’s crept back towards $70 a barrel, but there are plenty of voices warning it could slump to $40 on fears of oversupply, weaker demand and growing pressure from renewables. I’m hoping BP can make more disposals, to chip away at its $26bn net debt.
Dividends, buybacks and some growth
Then there’s geopolitics, currently centred on Iran, and far too tangled to unpack here. Climate change is another issue. For a fossil fuel-focused business, it’s potentially existential, and every investor has to decide how comfortable they feel with that risk. My own feelings are very mixed.
So how are BP shares doing this year? Pretty well, to my surprise. They’re up 10.7% over the past month, which would have turned £10,000 into £11,070. That’s despite BP admitting on January 14 that it’s taken a $5bn hit from its failed green energy transition. Investors seem to have shrugged that off as ancient history.
As the shares edge higher, the trailing dividend yield has slipped to 5.05%, although forecasts suggest it could hit 5.25% this year. BP’s also buying back shares at a rate of $750m a quarter. The forward price-to-earnings ratio of 14.3 isn’t demanding.
Ultimately, I bought BP for diversification. I had no exposure to oil and gas and concluded the world will still needs it as the green transition grinds on. Despite my concerns I still think BP shares are worth considering, as part of a balanced portfolio and with a long-term view.
