Some analysts are now speculating that oil prices could hit $180 or more in the months ahead. BP’s recent financial performance has been supported by higher energy prices, which climbed to over $120 a barrel earlier this year and currently best oil stock Brent, the international benchmark trades at $93/barrel at time of writing. 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.

For example, the International Energy Agency (IEA) believes that the soaring prices will lead to demand destruction, which will lower prices. However, in a separate report, Energy Aspects believes that oil will rise to $130 per barrel. The firm’s business has been helped by the relatively higher demand around the world.

Debate surrounding which are the best and worst metrics to focus on is lengthy, but the Zacks Momentum Style Score, part of the Zacks Style Scores, helps address this issue for us. According to data from Benzinga Pro, BP has a 52-week high of $41.38 and a 52-week low of $27.20. Taking into account all of these elements, it should come as no surprise that BP is a #1 (Strong Buy) stock with a Momentum Score of A. If you’ve been searching for a fresh pick that’s set to rise in the near-term, make sure to keep BP on your short list. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services.

This metric is found by dividing a stock’s price with the company’s revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This stock’s P/B looks solid versus its industry’s average P/B of 1.53.

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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 1.86%). Although European energy companies tend to hold more debt and more cash than U.S. peers, BP’s leverage is extremely high. The big new direction at BP, meanwhile, sounds pretty much like a complete corporate overhaul.

Energy has been by far the best-performing sector this year, in fact one of the very few industries that’s up on the year. That’s obviously because of high oil and gas prices, so is it too late to get in? For some energy stocks maybe, especially if their long term strategy is not aligned towards the energy transition. BP laid out its energy transition strategy – from integrated oil company to integrated energy company – more than two and a half years ago.

BP had reported a $6.25 billion profit in the first quarter of 2022, on its way to a record $28 billion annual figure. Here’s a high-quality portfolio that’s beaten the market consistently since the end of 2016. Below you’ll find our previous coverage of BP stock where you can track our view over time.

But that decade includes a point when oil prices were well over $100 per barrel. While the company’s ROCE was much higher in then than it is in today’s low-oil-price environment, it was still an industry laggard on this metric. That’s something to keep in mind when you consider the massive scale of the strategic shift BP is undertaking today. The company is one of the more leveraged names in the integrated energy peer group.

Besides, if the Republicans win the presidency in the U.S., that is likely to be favorable for companies like BP, and the gridlocked U.S. government is likely to be favorable for BP’s large U.S. business over the next two years too. It has a clear focus to decarbonize, but if the world slows down its transition to net zero due to energy security concerns, given the Russia situation, then BP reliable hydrocarbon business will be valued more. While energy transition was the buzzword in the sector for at least the last five years, the new buzzword is “energy trilemma” the balance between energy security, energy affordability and energy sustainability. BP’s quarterly results, reported earlier in November, highlighted the firm continues to make great progress in improving its financial position, as one argument BP in the last few years has been its high debt. Net debt has now fallen for 10 consecutive quarters and is now a third lower than at Q2 results in 2021. The net-debt-to-equity ratio is only 30%, which means BP is less exposed to the higher interest rate environment we are going to find ourselves in.

• A mismatch between supply and demand was already causing prices to rise at the beginning of the year, before the war in Ukraine added fuel to the fire.
• Shares in BP are selling at a forward price/earnings (p/e) ratio of 4.9 according to Refinitiv broker estimates.
• Shell’s earnings look likely to more than double, from $1.72 per share to $4.80.
• The cash saved from cutting the dividend will be used to help fund the shift in its business.
• 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.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system’s “Value” category. Stocks with “A” grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

He is always looking for high-quality growth opportunities trading at a reasonable price, preferring cash generative businesses with strong balance sheets over blue-sky growth stocks. They’re making money today, but investors shouldn’t forget the fact that these two businesses jointly announced some of the largest losses in British corporate history in 2020 after the price of oil briefly turned negative. And these hefty losses forced both companies to reduce their shareholder payouts, underlining the fragile nature of oil company dividends.

BP to Proceed With Clean Energy Plan, Reduce Oil & Gas Output

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. Turning to the four-hour chart, we see that the BP stock price has come under intense pressure in the past few weeks. The stock has managed to drop below important support levels at 410p and 371p. BP and its peers are also having to invest large sums of money in developing green energy projects.

• Afterall, Warren Buffett has large stakes in Chevron (CVX) and Occidental Petroleum (OXY).
• Meanwhile, natural gas prices in the US are up by nearly 160% in the past 12 months (while in the UK and European markets prices have risen by 150% and 227% respectively – gas is not a global market).
• For investors still looking for an oil play, conservatively financed Chevron is probably a better option.
• That’s not particularly different from what some of its European peers are doing; Royal Dutch Shell and Total (TTE 1.86%) have both been investing in electricity assets, too.

The company is talking about changing from an integrated oil company to an integrated energy company via investing in clean energy and electricity assets. That’s not particularly different from what some of its European peers are doing; Royal Dutch Shell and Total (TTE 1.86%) have both been investing in electricity assets, too. Shell, for reference, has also chosen to cut its dividend at this point. One risk the market may be overly worried about is the prospect of windfall taxes on the oil majors, so governments can score cheap political points and reduce budget deficits. The thing we must remember is that governments need companies like BP to supply energy and provide that security, so my view is that extreme windfall taxes are unlikely. In the UK the windfall tax has been offset by tax credits on new investment, which BP is taking advantage of, which secures future growth, and reduces the tax burden.

BP rises Tuesday, outperforms market

At the same time, the company has suffered because of the crisis in Ukraine that saw it report a $20.4 billion loss in the first quarter. Nevertheless, its underlying replacement cost profit rose to more than $6.2 billion, while the reduction of equity was about $14.7 billion. 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.

Momentum investing revolves around the idea of following a stock’s recent trend in either direction. The goal is that once a stock heads down a fixed path, it will lead to timely and profitable trades. For example, by 2030 it expects to reduce its oil production by a huge 40%. Meanwhile, management intends to put as much as 40% of its capital spending each year into non-oil investments.

Is BP the way to go?

Indeed, the respected International Energy Agency forecasts that global oil demand will increase between now and 2030. This should spur BP’s financial performance at a time when energy industry capital expenditure will be biased towards renewables and away from oil and gas exploration. Indeed, BP has axed new exploration outside of areas where it already has https://bigbostrade.com/ licenses, reserves and resources. With a dividend yield of over 4% and a trailing EV/EBITDA ratio of 3.8x and forward EV/EBITDA ratio of 2.4x, I can’t quite believe the cheapness of this stock. While the oil and gas sector is challenged in many ways, BP is a leader in the sector in changing direction away from high carbon businesses to low carbon businesses.

Shell also has a P/B ratio of 0.99 compared to its industry’s price-to-book ratio of 1.32. Over the past year, its P/B ratio has been as high as 1.31, as low as 0.91, with a median of 1.08. Over the past year, SHEL’s P/E has been as high as 9.46, as low as 4.40, with a median of 6.65; its PEG ratio has been as high as 2.37, as low as 0.48, with a median of 0.79 during the same time period.

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BP also said it expects to pay $1 billion under a UK windfall tax on the oil and gas sector between May 2022 and April 2023. BP had the most catastrophic accident in the history of the oil industry in the Gulf of Mexico, in 2010. As the accident occurred a decade ago, most investors have completely forgotten about it, thinking that it does not affect the stock of BP anymore. The pandemic is the primary factor behind the material losses of BP this year but the collapse of the stock near its 25-year lows cannot be attributed solely to the pandemic per se. On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the “Value” category.

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Any opinions, news, research, analysis, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. What followed has to be one of the biggest ever U-turns in global energy policy. Only a couple of months ago, policymakers were setting out plans to reduce global hydrocarbon production for good, but now they’re rushing to drive up supply. BP said it expects oil and European gas prices to remain strong in the second quarter even as refining profit margins are expected to weaken due to lower diesel prices. To conclude, BP is currently facing a perfect storm, partly for its own sins and partly for reasons beyond its control.

Getting BP into a position where it can deliver profits from large-scale renewable energy projects will require lots of upfront spending. The company made a $1.1 billion splash in offshore wind earlier this month, buying a stake in developments owned by fellow oil giant Equinor. His style has been heavily influenced by US investors Warren Buffett and Philip Carret.