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why is bp stock so low

Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show and premium investing services. Substantial-yet-stable yields are key to a second-income strategy. In this environment it is not surprising that BP and its Big Oil peers are minting cash. BP announced bumper profits for the first quarter of 2022 while Shell’s quarterly income hit a record. Refinitiv broker projections for BP are currently estimating a 48% jump in income for 2022.

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15 employees have rated BP Chief Executive Officer Bernard Looney on Bernard Looney has an approval rating of 63% among the company’s employees. This puts Bernard Looney in the bottom 25% of approval ratings compared to other CEOs of publicly-traded companies. Shell also has a P/B ratio of 0.99 compared to its industry’s price-to-book ratio of 1.53. Over the past year, its P/B ratio has been as high as 1.31, as low as 0.91, with a median of 1.07.

why is bp stock so low

This suggests a possible upside of 8.3% from the stock’s current price. View analysts price targets for BP or view top-rated stocks among Wall Street analysts. BP, plc, once known as British Petroleum, is one of the world’s 7 oil & gas supermajors with operations spanning the globe. In terms of revenue, it ranks 4th on the list and the company is vertically integrated as well with operations in all segments of the oil and gas sector.

Another great Oil and Gas – Integrated – International stock you could consider is Shell (SHEL), which is a # 2 (Buy) stock with a Value Score of A. Upgrade to MarketBeat All Access to add more stocks to your watchlist. BP had reported a $6.25 billion profit in the first quarter of 2022, on its way to a record $28 billion annual figure.

Dividend Strength

Some analysts are now speculating that oil prices could hit $180 or more in the months ahead. This increase in market prices for petroleum has led to surging profits in BP’s business in Q1’22. BP’s first-quarter Crypto slang profit in oil production and operations was $4.68B, showing a 3 X factor increase over the year-earlier period. BP’s total profits increased to $6.23B, showing 137.5% growth year over year.

With no end in sight to the Russia-Ukraine war, Russia’s exports are unwanted in much of the world, putting a real supply strain on oil markets. I believe BP’s low valuation and sensible energy transition strategy and improving financial position make the risk-reward ratio very favorable for investors. Although I have some reservations about the CFO Murray Auchincloss, I am a big fan of CEO Bernard Looney.

International Patients

Please note that estimate revision trends remain at the core of Zacks Rank as well. A nice path here can help show promise, and we have recently been seeing that with BP. At the same time, the group is not immune from the inflationary pressures other companies are dealing with. It noted in its 2021 results that rising wages and other costs are weighing on profit margins.

To put a number on that, BP’s debt-to-equity ratio has spiked to 1.1 during the current energy downturn. That’s higher than any of its closest peers and over four times higher than Chevron (CVX 1.31%). Although European energy companies tend to hold more debt and more cash than U.S. peers, BP’s leverage is extremely high. A side effect of the pandemic is the accelerated growth of investments in renewable energy sources. I think the market is also overlooking the company’s green energy ambitions. By 2030, the group expects to be spending $5bn a year on low-carbon energy projects, up from just $1.5bn in 2021.

why is bp stock so low

BP’s stock is owned by a variety of retail and institutional investors. Top institutional investors include Lazard Asset Management LLC (0.24%), Optiver Holding B.V. (0.00%), Citadel Advisors LLC (0.00%), CMT Capital Markets Trading GmbH (0.00%), Russell Investments Group Ltd. (0.06%) and New York State Common Retirement Fund (0.04%).

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The company produces and trades in natural gas and oil liquids, offers biofuels, and operates wind and solar power generating facilities. The company also provides de-carbonization solutions and services, such as hydrogen and carbon capture and storage, as part of its green agenda. BP, plc rebranded itself in 2000 giving new meaning to its name. The once British Petroleum is now “Beyond Petroleum” and focused on a major shift in its business. The company is working hard to move away from non-renewable carbon-based energy and into biofuels, solar, and wind.

And these hefty losses forced both companies to reduce their shareholder payouts, underlining the fragile nature of oil company dividends. However, even without Rosneft, BP is set to generate material cash flow and earnings… at least as long as petroleum prices remain above $100 a barrel. The short term outlook for petroleum prices has improved last week after EU leaders agreed on a sixth sanctions package, which is said to include an oil embargo. This oil embargo would ban 90% of Russia’s oil exports to the European Union by the end of the year. The expected decline in oil supply could lead to sharply rising prices later this year. Following Russia’s invasion of Ukraine, BP said in February that it was going to exit its investment in Rosneft, in which BP had a 19.75% ownership.


Analysts expect the Russian producer to increase its output this year. While this position exposes the company to geopolitical risks (especially now), it is a cash cow, and analysts believe the market is overlooking its potential value. The company’s international operations produce hydrocarbon products for consumers worldwide, giving the corporation diversified income streams. As the qualities I have outlined below start to produce results for the enterprise over the next five to 10 years, I think the market will re-rate the stock to a higher value. For example, the International Energy Agency (IEA) believes that the soaring prices will lead to demand destruction, which will lower prices.

This is the part of the business plan of BP that has caused panic in the market. Not only does the oil major have no expertise in renewable energy projects, but it will be nearly impossible to achieve the same margins it enjoyed in the oil industry for decades. It is also worth noting that BP is infamous for having repeatedly dismissed renewable energy projects in the past, claiming that oil was much more profitable. Moreover, the business plan is still vague, with very few details, and thus it does not help reduce the uncertainty that surrounds this historical shift of the company. I believe that all of the above qualities could drive BP’s profits higher in the years ahead. A strong balance sheet gives the organisation room to invest in its green energy drive.

Here’s Why BP (BP) is a Great Momentum Stock to Buy

At the same time, investors can look forward to that market-beating 7.3% dividend yield. Even if the oil price does fall, it needs to fall more than one third before it puts any pressure on BP’s cash distribution plans. Even if oil and gas prices do fall, economic activity will pick up and BP’s refining margins would likely increase. Regardless of the exact path of performance across BP’s integrated set of energy businesses, the stock’s extremely low valuation compensates for these risks. The value of stocks, shares and any dividend income may fall as well as rise and is not guaranteed, so you may get back less than you invested. You should not invest any money you cannot afford to lose, and you should not rely on any dividend income to meet your living expenses.

In doing so, it has handily outperformed the FTSE 100 by 19 percentage points. Since then, BP stock has increased by 9.9% and is now trading at $38.40. © 2023 Market data provided is at least 10-minutes delayed and hosted by Barchart Solutions. Information is provided ‘as-is’ and solely for informational purposes, not for trading purposes or advice, and is delayed. To see all exchange delays and terms of use please see Barchart’s disclaimer. Looney took over as CEO in February, but the so-called “BP Week” this month was his big moment, designed to put flesh on the bones of a bold plan to become a “net-zero” energy company by 2050.

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