Should You Invest in BP Oil and Gas Stock?
BRITISH PETROLEUM COMPANY ANALYSIS
Stock Name and Trading Stock Exchange Platform
BP PLC, BP- Publicly traded on four exchanges as follows: LSE as BP, NYSE as BP, Frankfurt exchange (FWB) as BPE, and the FTSE 100 component as BP.
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The Stock Sector
BP is a leading oil and gas company and is ranked as one of the seven ‘supermajors’ in the industry, headquartered in London, UK.
BP embodies the entirety hydrocarbon industry through vertical integration effectively controlling the ecosystem from drilling and production to the point of sale (POS).
BP has also made huge strides in clean energy and renewables.
Recent News About BP
BP has attracted global attention with the withdrawal from Rosneft, a mega oil titan in Russia. This is due to the economic sanctions following the ongoing invasion.
This is a huge blow for BP having operated for about three decades in the space and accounting for nearly half its global hydrocarbons reserves.
This will result in charges of up to $25B.
BP started the year strongly, announcing that it posted an impressive profit from 2021, which is an eight-year high.
The Russia-Ukraine situation has had its toll on BP. It trades below this year’s high of 415p and is seeing increased volatility.
BP has recovered from the Rosneft fall and rose by 5% on 07 March 2022, closing at 377p.
BP has claimed that it is unaffected by the changes in its Russian operations and it has embraced the green energy sector.
Together with Equinor, they are planning to convert the marine terminal in Brooklyn into a wind hub.
The global oil shortage due to the invasion has already seen oil prices significantly increase.
Oil futures have spiked with a 13-year high of $130 per barrel being recorded in the US.
Current Position of BP
BP is in an interesting position at the moment. It is a large corporation that has been relatively tied to one industry for over a century. BP has been up over the year but still below its record highs.
Typical of all large companies with a long history, they eventually reach a terminal value and slowly decline until disrupted by upcoming fast and efficient players as an incumbent in its industry.
BP employs at least 60.000 employees and operates in over 80 countries around the world. It is a major player in the oil industry with proven reserves of about 19.45 billion.
BP has had its fair share of controversies and major setbacks with accidents, oil spills, regulations to mention a few.
The pandemic had a huge impact on BP with oil prices reaching an unprecedented negative in 2020. This was probably the worst year for BP as Oil consumption was at an all-time low.
Fears amidst the pandemic and major investors dumping oil stocks further aggravated the situation.
2021 was BP’s year for redemption as she bounced back with vengeance. It did extremely well with nearly almost every metric of their performance in the green.
Revenue recorded at US $164B, up almost 50% from 2020. Operating income was at US$18.08B and total assets at $287.27B.
BP is looking to enter the Carbon offsetting sector, validated by its acquisition of Finite Carbon, the largest in the space in the US.
BP’s transition to other sectors will not be smooth, given its heavy involvement in its core industry, bureaucracy will likely hamper the transition.
The market capitalization currently stands at 68.37 billion GBP.
BP Stock Price Chart
As of 08 March 2022, BP is trading at a day high of GBX 370 up from its previous close of GBX 361.50.
The volume of traded shares is 85.50 million. The day range is from GBX359- GBX 370. BP has traded at a 52- week high of GBX 419 and a 52-week low of GBX 275.
BP is still trading below its record high. The share price is justified by analysts as fairly reasonable.
The overall decline of oil is believed to be the cause of the declining share price over the years.
BP is in an old industry that is fighting to ensure its survival.
Currently, the world situation has favored its performance. BP and other oil companies see surges only if the price of oil goes up.
Russian oil is cut off from the world and causing a shortage which is driving the hike in oil prices.
Oil companies have long hoped to enter the Russian market but this window will now be closed.
The past month was excellent for BP because it was generally bullish trading above the moving average.
It has largely been due to oil price but it has been a recommended buy over the cause of last year due to performance.
Sentiment about BP
There are a lot of skeptics re the growth of BP. Many believe the oil and gas industry is at an all-time high and has reached peak production.
Oil prices have been skyrocketing, but oil stocks have not kept up quite as much. Currently at $107 per barrel oil is at a 7-year-high.
This is due to the laws of demand and supply, with supply being short the price will rise.
The highs we are witnessing now in the oil futures could be the best we get. Even with rising oil prices, oil stocks could go down because of utility and the world moving away from oil.
In a recent interview with Bloomberg, One CEO of an oil investment firm believes oil will shoot in the short term to keep up with prices.
This has been reflected in the market where there is a boom in oil stocks at the moment.
No matter which direction the prices go, the oil giants will capitalize to make gains by selling in rising markets and hoarding in falling markets.
At the moment many are looking to sell with the high oil prices. This is especially true for long holders who have seen poor returns in the past decade.
Buying at these high prices is risky and only early oil investors are in the money.
Considering oil was trading at a negative in 2020, previous short sellers won at that time, but those who bought the dip and are selling now have made massive gains in two years.
BP is very profitable and has been so over the years. What is worrying is the decline of profit margins in the past decade.
In 2012, BP netted $375 billion in revenue and $11 billion in profits. It recently posted an impressive $7.5 billion representing an eight-year high.
BP will take a lot of time to return to its former profit margins. The operating income was $18.08 billion and net income was $8.49 billion.
Future of BP
BP is a captain of industry that will likely maneuver anything that lies ahead. Existing for over a century, it has faced several booms and bust cycles.
The CEO of BP, Bernard Looney, affirmed that BP will spend 40% of its annual capital in transitioning to green energy by 2025.
BP is not dramatically surging like similar oil stocks in the US. $HUSA is currently up nearly 500%.
Other oil stocks have followed suit and are seeing astronomical rises of at least 100%.
BP maintains a modestly low hike of less than 5%. The future for BP and other oil companies is uncertain.
The outlook is pessimistic and the world hopes to migrate from fossil fuels that is claimed to cause global warming.
The G7 climate change summit last year reinforced campaigns for green energy.
BP moving into the clean energy sector could see it do well but it is unlikely that it will return to its former glory days.
Analysts are on the bullish side considering BP and speculate a 7% growth in the next 2 years.
BP is set for buybacks which will increase the stock price. The P.E ratio is at 14.72.
BP is arguably too big to fail and will likely be around for a long time to come, even though it is a shell of what it once was.
Is this a good time to invest in BP stock?
The sustainability of the oil price hike is unknown. In the short term, it is a blessing for oil companies.
Buying at the top of the market is never a good move and that seems to be the situation for oil stocks at the moment.
Short-term traders will rake significant gains by continuous buying and selling in the next few months.
Short-sellers will be looking to time the height of the bubble and bet against it when it starts falling.
Oil stocks are likely to witness off the charts spiking over the next few months. Russia being the top exporter of oil in the world will have a ripple effect when it cuts off its supply from the world.
We can expect these rollercoaster moves to keep going in the oil futures.
Knowing the duration at which this mania will end is where the differentiator lies the gainers and losers.
BP is a strong sell at the moment due to the record results.
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