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BP (LSE: BP) shares are once again in the thick of it, plunging almost 6% this morning as markets absorb Donald Trump’s ‘Liberation Day’ tariffs. Could this be an opportunity to snap up the FTSE 100 oil and gas giant at a reduced price?
Lots of things are falling today, including the oil price itself. Brent crude has slumped almost 5% to $70 a barrel, with traders on edge as the world enters unchartered waters.
If global trade slows, as most expect, demand for oil could slide, and BP’s price may follow. With so much bad news priced into the stock, it might surprise us all.
Can the FTSE 100 oil giant fight back?
The BP share price has been heading south since the highs of 2022, when Putin’s invasion of Ukraine sent energy prices surging. Now, it faces a new set of challenges as it makes an awkward reverse ferret on its green energy strategy.
BP is scurrying back to what it knows best: fossil fuels. The shift may make sense in the short term, given the unpredictability of green energy investments and the US political climate. But if renewables continue to advance, with costs falling and efficiency improving, BP could find itself stranded.
It’s swimming against the tide in the UK, as the Labour government blocks new North Sea exploration, and slaps windfall taxes on the oil BP does drill in UK waters.
However, the board has just finalised a deal with Iraq to redevelop several giant oil fields in Kirkuk, which include 3bn barrels of oil equivalent.
Investors remain wary, with CEO Murray Auchincloss under huge pressure to turn BP’s fortunes around. He’s cutting costs and capital expenditure, while looking to raise about £20bn from divestments, to continue driving down net debt.
Activist investor Elliott is stirring the pot, pushing for a break-up of the company. No doubt there will be more talk of a New York listing too. Or even a merger with Shell. Everything seems to be in play in today’s crazy upside down world.
But let’s get back to investment basics. BP still offers a generous income stream. The stock is forecast to yield 5.91% this year, rising to 6.1% in 2025.
Dividends, buybacks, and worries
That’s an attractive payout in an uncertain market. However, investors should watch for signs that BP’s recent share buyback spree is slowing.
The big question is where BP goes from here. The 16 analysts tracking the stock have a median 12-month target of just over 491p.
If that proves accurate, it would mark a gain of just over 20% from today’s price. Factor in the dividend, and the total return could top 25%.
As someone who recently took a position in BP, I’d take that. But most of those broker forecasts would have been produced before recent tariff turbulence, when markets still hoped Donald Trump might be good for the global economy.
For decades, BP was one of those shares that every UK investor felt they had to own, but all the hassles since the 2010 Deepwater Horizon disaster have shaken people’s faith.
I think the shares are still worth considering for investors looking to add fossil fuel exposure to their portfolio. But BP isn’t the surefire bet it used to be. I don’t think it’s a value trap, but I can’t say that for sure.
