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BP Stock Performance Highlights Challenges and Opportunities in Oil Market
BP Stock – The BP (LSE: BP.) share price has finally started to gain traction, climbing 20% over the past three months. At first glance, this might appear impressive, but at today’s (28 August) price of 428.4p, the stock has essentially returned to where it stood 12 months ago. Considering the challenges BP has faced over the past year, however, investors may find some comfort in this rebound.
FTSE 100 Dividend Opportunity Amid Strategy U-Turn
BP, one of the FTSE 100’s oil giants, found itself in hot water earlier this year after a sharp public reversal in its green strategy. The move drew criticism from both sides of the climate debate, attracting scrutiny from activist investors. BP CEO Murray Auchincloss has faced ongoing pressure to demonstrate leadership amid these controversies.
While high oil prices could have soothed some of the criticism, the market hasn’t provided much of a cushion. Brent crude recently touched a one-month high of $68.80 per barrel, only to retreat to $66.80, roughly 13% below last year’s $76.80. Lower oil prices directly impact profitability, underscoring the challenges for BP.
Financial Performance: A Mixed Picture
BP reported full-year 2024 underlying replacement cost profit of $8.9bn, a sharp decline from $15.2bn in 2023. Despite the downturn, BP continues to attract attention from investors looking at the long-term potential of troubled companies.
For example, Q2 2024 results released on 5 August provided some optimism. BP’s underlying profit came in at $2.35bn, down from $2.76bn last year but surpassing forecasts of $1.81bn. The company also raised its dividend by 4% to 8.32 cents, while maintaining a share buyback program at $750m, down from $1.75bn in the final quarter of 2024. These measures helped reassure the market despite broader challenges.
Analyst Upgrades and Key Discoveries
Analyst house Berenberg recently upgraded BP from Hold to Buy, citing stronger free cash flow and progress in cost-cutting initiatives. They also increased their target price to 500p, reflecting a more optimistic outlook.
Investors were additionally encouraged by BP’s Bumerangue oil discovery in Brazil, its largest find in 25 years, further reinforcing the company’s long-term potential despite current volatility.
Shifting Role in Investment Portfolios
BP is no longer viewed as the reliable core holding it was during the 1990s. Its price-to-earnings (P/E) ratio now sits at 243, more than 16 times the long-term FTSE 100 average of 15. This extreme valuation reflects both market skepticism and the uncertainty surrounding BP’s future strategy and profitability.
Dividend Growth Remains a Bright Spot
Despite operational and market challenges, BP’s dividend remains a significant draw for investors. Currently yielding 5.65% on a trailing basis, the payout has recovered strongly since the 2020 cuts. Dividend hikes have included 11.33% in 2022, 18.02% in 2023, and 10.03% in 2024. Projections suggest modest growth ahead, with the yield expected to rise to 5.68% in 2025 and 5.9% in 2026.
Market Expectations and Total Returns
Consensus forecasts anticipate 9% share price growth for BP this year, potentially reaching 467.2p. When combined with the dividend, investors could expect a total return approaching 15%. These figures reflect ongoing optimism among some analysts despite the broader challenges facing the company.
BP’s stock performance highlights the complex balance between operational challenges, market volatility, and investor sentiment. While its share price rebound is modest compared to historic levels, developments like Bumerangue and dividend growth continue to capture investor attention.
For now, BP remains a highly watched FTSE 100 heavyweight, navigating a year marked by strategic reversals, oil price fluctuations, and activist scrutiny. Its trajectory in the coming months will likely hinge on the company’s ability to stabilize operations, capitalize on discoveries, and maintain financial discipline in a volatile energy market.
