It has not been an easy few years to be a shareholder in oil major BP (LSE: BP). The company has made strategic U-turns over whether it even wanted to be an oil major. Five years ago it slashed its dividend. Meanwhile, the BP share price has this week hit a three-year low.
Indeed, the share has lost 18% in value so far in 2025 alone.
That is despite hopes in the City that a campaign by an activist US hedge fund would help to drive the price in the other direction.
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The company has badly lagged peers in recent years. The share price has fallen 1% in five years. During that time, Shell has soared 52% and US rival ExxonMobil is up 134%.
BP still has lots to like
The reasons for that relative underperformance make sense to me.
While Shell also cut its dividend in 2020, ExxonMobil has continued its decades-long streak of annual increases in the annual payout per share.
BP has been the least committed of the three to making oil and gas the centrepiece of its future business strategy. Although it has now backtracked on its approach and reverted to being clear about the ongoing importance of oil to its business, investors did not like the potential for a lower-margin business. The strategic about-turns have raised questions about the quality of BP management. Along the way the former chief executive resigned (the chairman is also heading for the exit).
But stepping aside from the short-term history, what about the thing I think matters from an investment perspective: the long-term outlook?
Here, I believe BP looks more promising. It has large reserves, long experience in the oil business and an extensive global distribution network.
Potential value over the long term
On that basis, I think the current share price could be a potential bargain for my portfolio.
Not only that, but the current low share price means that the FTSE 100 share now offers a dividend yield of 7.3%. So, even if it took years for the share price to move up meaningfully (if it does), I could be rewarded for my patience with a juicy yield, as long as the dividend is not cut again.
However, for now at least I see shares I like more elsewhere in the market, so have no plans to buy BP for my portfolio at this moment.
The past few years of management dithering have shaken my confidence in the company and I see a risk that such a corporate culture could continue to lead to poor performance.
Meanwhile, energy price volatility is a risk to profits, albeit one that could go the other way too: rising prices could help boost profits. Times of economic uncertainty can lead to volatile prices for energy especially if demand falls and I see a risk of that happening.
