Can BP plc deliver a successful recovery?

Does BP plc (LON:BP) (BP.L) have an improving outlook?


Having fallen by around 10% in the last month, I think that the BP plc (LON:BP) (BP.L) share price could offer improving value for money.

The oil and gas producer now trades on a P/E ratio of around 12.7, which suggests to me that it could have a margin of safety. This may be necessary given the uncertain outlook for the oil price. The prospect of global economic challenges could mean that demand for oil comes under a degree of pressure over the medium term, and this may slow down its upward advance.

Countering this, though, could be the effects of geopolitical risk in countries such as Libya and Venezuela. Sanctions in Iran may also cause supply growth to come under pressure, and the end result could be a strengthening of the oil price over the medium term.

In my opinion, the prospects for the BP share price may be relatively uncertain and volatile in the near term. In the long run, though, I remain optimistic about its ability to generate capital growth after its recent pullback.

In terms of its operational performance, the company recently reported that it is executing its strategy as planned. It continues to invest in its asset base, with the recent purchase of BHP Billiton’s petroleum assets having the potential to catalyse its future growth rate in my view.

With a dividend yield of around 5.5%, I feel that BP could offer improving total returns over the long run. While it may not prove to be a particularly robust stock due to its dependence on the oil price and the uncertain outlook for black gold, I believe that the company has a sound strategy and an appealing valuation.

Therefore, after a period of decline, I remain optimistic about the future prospects of its share price. I think that, in time, it could deliver a successful recovery.

About Robert Stephens 5138 Articles
Robert Stephens is a CFA Charterholder and an Equity Analyst by trade. He is a passionate private investor who has been buying and selling shares for many years, owning a wide range of UK shares in the process. He has written for Citywire and The Motley Fool US and now runs his own business. To contact Robert, please email [email protected] or use one of the other contact methods available on the 'Contact Us' page