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It was a difficult year BP (LSE: BP) share price, down 7.31% over the past 12 months. The biggest damage happened last month, when it was seen 8.23%. At today's price of 445p, the FTSE 100 The oil and gas giant is trading at a 52-week low.
Of course, the price of oil is in your heart. Although BP is much more than an oil explorer, its fortunes are still tied to energy prices. A barrel of Brent crude now costs $76.81, which is 9.52% less than last month.
FTSE 100 falling star
Over one year, Brent is down 10.56% despite the Middle East conflict, which has had little impact on supply so far.
This slide is down to the global economic downturn, as demand falls in the US, Europe and China. Even falling US stocks failed to lift prices.
BP's second quarter results, published on 30 July, were a mixed bag. The group posted a reported loss for the quarter of $100m, down from a profit of $2.3bn in Q1. That includes $2.8bn in repairs, including $1.5bn in impairments. The board also warned production may decline in Q3.
Thankfully, there was plenty of good news for shareholders too, with free cash flow doubling to $4.4bn. The board is set to reward shareholders, raise the dividend by 10% and announce another $1.75bn share buyback. BP also paid off $1.42bn of its debt pile in the quarter, bringing it down to $22.6bn.
Today, BP shares look undeniably cheap, trading at just 6.61 times earnings. Even better, the yield is back more than 5%.
Share growth opportunities
BP recovered its share after the pandemic but it is slowly returning to respectable levels. Let's see what the chart says.
Chart with TradingView
Today's next yield of 5.01% is expected to reach 5.43% in 2024 and 5.83% in 2025. And don't forget share purchases.
BP can break even at an oil price as low as $40 a barrel, but the higher it is, the better, obviously. Energy prices tend to fluctuate, and I'd rather buy stocks in the sector when they're down than when they're up. Like today.
Much now depends on the wider economy. Last week's volatility in US stock markets was largely due to the US Federal Reserve's decision to hold interest rates in August. Some analysts fear that even if the Fed cuts them by 50 basis points in September, it will do little to stem the US recession.
I have chronic anxiety. BP seems to have taken advantage of the move back to net zero to ease up on renewables, but the problem isn't going away. I buy stocks with a five- to 10-year horizon, and during that time climate change pressures look set to increase. However, as we have seen with electric cars, extracting oil from the world will not be easy.
Despite these concerns, I think BP shares look like an excellent investment. At today's cheap rate, I don't see much point in waiting until it gets cheaper. I will add them to my portfolio when I have the cash.
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