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The BP (LSE: BP) share price has taken a real beating. In a turbulent time for global markets, the oil giant has been hit harder than most.
BP shares have tumbled 15% in just a week and are down a full 35% over the past 12 months. That’s a bruising run for the FTSE 100 heavyweight. The share price spike during the Putin-fuelled energy shock of 2022 is now a fading memory.
So what’s gone wrong? A lot, actually. Obviously, there’s Donald Trump. His tariff talk has sent oil prices sliding with Brent crude now hovering closer to $60 a barrel.
Can this FTSE 100 big beast roar again?
That’s bad news for energy giants like BP. While it can break even at around $40 a barrel, falling prices inevitably hit earnings and profits. If trade tensions sink the global economy then energy demand will follow, along with BP shares.
BP has problems of its own. It’s spent the last few years tying itself in knots over its strategy. It swung hard toward green energy, only to backtrack in recent months after coming under heavy pressure from activist investor Elliott, which took a 5% stake and is pushing for a reset.
BP’s chairman Helge Lund – a key backer of the net zero transition – is stepping down. New CEO Murray Auchincloss is scaling back renewables investment and ramping oil and gas spending back up.
That has left the company under fire from angry climate critics and equally frustrated shareholders alike.
BP’s earnings nosedived even before the latest bout of market chaos, with 2024’s earnings per share down a staggering 97%. As a result, the company’s price-to-earnings ratio has shot up to 186. A few months ago, the P/E was around five or six times and looked a bargain. Today, I’m not so sure.
The recent trading update, published on 11 April, didn’t help. BP said gas and low-carbon energy production is down, with only a slight rise in oil. Gas trading was “weak” while net debt jumped by $4bn in the quarter. While BP expects that to reverse due to seasonal factors, it added to the gloom.
I just hope the dividend holds
Its stellar share buybacks have been trimmed. BP was spending up to $1.75bn a quarter buying back its own shares. Now that’s been cut back to between $750m and $1bn. Rightly so, given falling earnings, but still a blow.
Following the share price slump, BP’s forecast to yield 7.4% in 2025 and 7.72% in 2026. Let’s hope the dividend proves sustainable. A cut can’t be ruled out.
If central banks start slashing interest rates to offset a slowdown, its $23bn debt will get cheaper to service and energy demand could pick up. That might throw BP a lifeline.
I bought BP shares a couple of months ago, taking advantage of the low P/E and improved yield. Obviously, it hasn’t gone well so far. I’m holding, but this is a highly risky stock today. In fact, it has been ever since the Deepwater Horizon blow-out in 2010, some 15 years ago now.
Bargain hunters considering the stock should approach with extreme caution. There’s an awful lot going on here, and we don’t know how it will pan out. Or even if it’s a bargain!
