Are BP Shares (LON: BP) a Buy?

BP's shares (LON: BP) have taken a mild 0.24% dip through this morning's session after a 6.3% rally in the week leading in. The past year paints a more complicated story, with the stock down 12.3%, highlighting the inherent volatility in the energy sector. The year-to-date performance, however, shows an impressive 8.4% gain off December's lows, and the immediate technical picture for BP is largely positive.

The stock price sits comfortably above both its 50-day and 200-day moving averages, generating bullish signals for many technical traders. Furthermore, the stock has just last week broken through the “golden cross,” a bullish indicator where the 50-day moving average surpasses the 200-day moving average.

While the Relative Strength Index (RSI) sits in a neutral to slightly overbought territory (around 63), the Moving Average Convergence Divergence (MACD) provides another bullish signal.

Strategic Shifts

Under CEO Murray Auchincloss, the company has embarked on a “fundamental reset,” prioritizing cash flow and returns. This translates to a noticeable shift back towards oil and gas investment, while simultaneously reducing spending on lower-carbon projects. This strategy pivot hasn't come out of the blue. Activist hedge fund Elliott Management, known for pushing for shareholder value, has acquired a stake in BP, and their influence is believed to be a factor in BP's renewed focus on its traditional strengths.

The company plans to reduce capital expenditure to USD $13-15 billion annually up to 2027, coupled with a substantial $20 billion divestment program over the same period. Additionally a $4-5 billion cost reduction by the end of 2027 is planned.

These moves signal a clear commitment to streamlining operations and maximizing returns from existing assets. Part of this strategy includes boosting oil production to 2.3-2.5 million barrels per day by 2030, a move that directly contrasts with the global push for reduced fossil fuel reliance.

BP's attempt to generate returns for share holders is also evidenced in their expected announce of a share buyback of $750 million to $1 billion with its Q1 2025 results.

Recent Results & Outlook

Q4 2024 earnings, reported in February, revealed a miss on both EPS and revenue estimates, with reported EPS of $0.44 USD falling short of the expected $0.56 USD. Revenue also declined by -12.25% to $45.75 billion.

Looking ahead, the earnings picture is uncertain. Q1 2025 EPS estimates range from $0.61 USD to $0.684 USD, with revenue projected at $49.27 billion. Yearly EPS forecasts for December 2025 are also broad, ranging from $2.82 to $3.69 USD. This wide range reflects the inherent unpredictability in forecasting oil prices and the impact of geopolitical events, such as the ongoing conflict in Ukraine and disruptions in the Red Sea, all of which are a factor.
With forecasts also suggesting oil could be getting cheaper, this is another area for concern.

BP's dividend yield, currently between 5.53% and 6.05%, remains attractive to income-seeking investors. And while the company's earnings are projected to grow by 16.15% in the next year, analysts offer a mixed outlook. Some forecast a modest total return of around 11.9% annually through 2030, while others are more cautious, acknowledging the inherent risks and challenges in BP's strategic shift.