The BP (LSE: BP) share price has had a strong run. It’s up 40% in the last year and 70% over five. Don’t let that fool you. It’s also a risky old thing and could be about to come crashing down. Or am I being overdramatic?
Today, BP is a company under a cloud. In fact, it’s been that way ever since the Deepwater Horizon tragedy in 2010. The compensation cost it $65bn, quite aside from the reputational damage.
Management has since lurched all over the place, making a big jump into renewables then charging back to its fossil fuel comfort zone. Recent boardroom shenanigans could fill a book. The FTSE 100 oil and gas giant has also become a target for windfall taxes.
Should I avoid this FTSE 100 stock?
BP shares would probably have taken a beating lately but for one thing. The oil price has been flying and it’s making lots of money.
BP measures its core profitability by using underlying replacement cost (RC) profits. These have fluctuated wildly, depending on energy prices, as my quick run-through shows:
- 2025 – $7.5bn
- 2024 – $8.9bn
- 2023 – $13.8bn
- 2022 – $27.7bn
- 2021 – $12.8bn
The 2022 spike was down to the Ukraine oil shock, which sent Brent crude rocketing past $112 a barrel that June. The cash continued to flow in 2023. With the oil price sliding towards $60 last year, profits dwindled. But that’s changing now.
In the first three months of 2026, quarterly RC profits doubled to $3.2bn. That’s despite the Iran war only affecting the March numbers. Q2 profits will be much more impressive. This isn’t just down to the higher oil price, which peaked at $118 a barrel on 29 April. BP’s trading division is thriving, by helping customers secure energy supplies.
Or should investors buy the dip?
The Strait of Hormuz closure isn’t all good news for BP, as it’s blocking of its own Gulf exports. And now, once again, we have talk of a US peace deal with Iran. That’s sent Brent tumbling to just over $82 a barrel, a long way from its April high. On Friday (12 June), stock markets soared on peace hopes and excitement around the SpaceX IPO. By contrast, BP shares fell 1.98%. Could the slide continue next week?
Sadly, the path to peace remains bumpy. But if the latest deal does come off, BP shares will take a hit. Yet I don’t think it will be too brutal. Investors have been cautious about chasing the stock upwards. It doesn’t look overpriced today, with a modest forward price-to-earnings ratio of 8.1.
Also, BP isn’t just about share price growth. It rewards investors with generous dividends as well. The forward yield is 4.77%. This is a cyclical stock, and I think it’s best bought when down. Despite the green transition, the world will need fossil fuels for years. BP shares could be in for a rough time in the short term, but I still think long-term investors might consider buying them on a dip.
Should you invest £5,000 in Bp P.l.c. right now?
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Harvey Jones owns shares in BP.
