BP (LSE:BP.) shares haven’t been stellar performers of late. The stock has certainly been stronger than some other UK shares, but even after dividends, the energy giant is still struggling to keep up with the FTSE 100. And a £1,000 investment in February 2025 is now only worth £1,079.20 versus the £1,238 index investors have earned.
So, what’s going on? And will BP shares start to catch up in 2026?
What’s up with BP shares?
Even after investors welcomed management’s new strategy to refocus on fossil fuels and slow its transition toward renewables, BP’s performance has remained weaker compared to some of its peers like Shell. And this lacklustre display hasn’t been helped by a general weakening of oil prices throughout 2025.
Skip ahead to February 2026, and the group’s latest results haven’t done much to improve its image in the eyes of investors.
On the positive side of things, BP has started showing signs of improved operational performance. Upstream reliability reached a record high of 96.1%, with refining reliability also hitting a similarly impressive 96.3%. And the subsequent boost to production did ultimately deliver stronger-than-expected cash generation.
At the same time, the firm has raised its cost-cutting targets for 2027 to now reach between $5.5bn and $6.5bn, paving the way for wider production margins and offsetting the impact of lower oil prices.
However, a few strategic decisions have nonetheless given investors more reasons to be cautious, leading to 6% tumble on its latest results.
Bye-bye buybacks
With management prioritising strengthening its balance sheet, shareholder buybacks have officially been suspended indefinitely. The decision seems prudent given the softer commodity price environment BP is having to navigate through. But it also signals that management doesn’t expect the oil prices to start bouncing back anytime soon.
Meanwhile, continued optimisation of its portfolio has led to a further $4bn of asset impairment charges. While these don’t make an impact on cash flow, it nonetheless calls into question the quality of BP’s earlier investments, particularly within renewables.
Topping all this off with a decline in production volumes in 2025, despite investing $14.5bn in capex, doesn’t bode well for future earnings. And if both oil & gas prices alongside output suffer, the 5.4% dividend yield paid by BP shares could soon come under pressure.
So, where does that leave investors today?
What’s the verdict?
The energy sector is notoriously cyclical, and BP has a long track record of navigating through weaker price environments. As such, I’m not overly concerned with its long-term trajectory.
However, the near term remains riddled with uncertainty. And with early signs of weakness creeping in, BP shares could soon start to retreat, especially if oil & gas prices continue to tumble.
With that in mind, I think the shares are worth watching closely. After all, investing near the bottom of a market cycle is a proven way to earn strong returns with the eventual recovery. But the bottom of this cycle seemingly still lies ahead, I think it’s too early for me to buy the shares. That’s why I’m looking for buying opportunities elsewhere.
