BP (LSE: BP.) shares have delivered a remarkable turnaround over the past year.
A £5,000 investment made 12 months ago would now be worth around £9,600, including dividends.
That’s close to a doubling in a relatively short period, driven by a sharp rebound after last April’s sell-off, when the stock briefly fell to around 330p before recovering towards 600p.
Along the way, investors also collected roughly 33p per share in dividends, adding an extra layer of return on top of the share price recovery.
The question now is whether this run — taking its share price to a 17-year high — can continue.
Shifting investment case
Higher oil prices are clearly providing a boost at the moment. But focusing too heavily on this risks missing a more important shift taking place beneath the surface.
At its core, BP remains a highly cash-generative business. Even in more subdued pricing environments, it continues to produce strong operating cash flow and support its dividend. In FY25, operating cash flow reached $24.5bn, highlighting the resilience of the underlying model.
The key point is how consistently that cash generation has translated into dividend capacity through the cycle. The table below shows this relationship in recent years:
| Financial metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Free cash flow (FCF) ($m) | 13,870 | 29,572 | 17,887 | 12,328 | 12,414 |
| FCF dividend cover | 3.22 | 6.79 | 3.72 | 2.46 | 2.45 |
Strategy reset
The second driver is BP’s strategic reset and refocus on core upstream oil and gas.
Out to 2027, management has guided at least $10bn a year of capital allocation into hydrocarbons, with around 70% directed to oil and the remainder to gas.
In 2025, six major projects added 150,000 barrels per day to production. This was followed by a major contract in Iraq to rehabilitate the giant Kirkuk fields, alongside BP’s largest oil discovery in 25 years in Brazil.
At the same time, the group has been simplifying its portfolio. Asset disposals, including its majority stake in Castrol and the sale of the Gelsenkirchen refinery in Germany, signal a clearer shift towards a leaner structure.
This matters for two reasons. First, it supports balance sheet repair through debt reduction. Second, it shifts the business towards a more streamlined upstream model that is better aligned with cash generation over capital intensity.
Over time, this combination of higher production and a simpler cost base should support more predictable earnings growth and stronger dividend capacity.
Risks
The main risk to BP is a global economic slowdown, which could weaken energy demand and reduce consumption across key markets. While hydrocarbons remain essential, a prolonged recession would likely pressure volumes and limit the pace of cash flow growth.
There are also execution risks around large upstream projects, alongside regulatory and political intervention in energy markets, which could affect capital allocation and returns over time.
Bottom line
BP’s recent strength is supported by more than just oil prices. Strong cash generation, a simplified upstream-focused strategy, and resilient dividend cover all point to a business still capable of delivering through the cycle.
While volatility will remain, I continue to see BP as a core holding in my ISA portfolio and have recently added more shares. That said, it is not the only resilient dividend-paying business I currently have on my watchlist.
