BP’s (LSE: BP) shares have plummeted nearly 18% year-to-date, with fresh pain inflicted last week following a gloomy trading update and a stinging downgrade from UBS.
The oil giant’s share price currently sits at 331p, offering an eye-watering dividend yield of 7.3% – a figure that speaks volumes about investor anxiety rather than generosity.
Friday brought particularly unwelcome news as UBS slashed its rating from ‘buy’ to ‘neutral’ and cut its price target from 525p to 400p, citing “financial uncertainty” that hampers BP’s ability to rebuild market confidence. The bank’s analysts highlighted concerns around debt reduction and reserve replenishment as key stumbling blocks.
The downgrade follows BP’s disappointing trading update, which warned of weak gas trading performance and a troubling £4 billion surge in net debt. The company blamed this debt increase on seasonal inventory effects, bonus payments, and costs related to low-carbon asset sales, though it expects much of this to reverse.
Production figures told a similarly bleak story. Gas output fell significantly, partly due to asset sales in Egypt and Trinidad that trimmed approximately 90,000 barrels of oil equivalent per day from production. While oil production inched slightly higher, realised prices remained flat.
Jefferies analysts estimate the update could drive consensus earnings down by 10-15%, primarily due to a higher-than-expected quarterly tax rate of around 50%.
This poor performance arrives at a particularly vulnerable moment for BP, with activist investor Elliott Advisors circling the company. The US hedge fund has reportedly built a stake of around 5% and is pushing for drastic changes, including potential break-up of the group and scaling back energy transition plans in favour of focusing on lucrative oil and gas production.
Adding to the leadership uncertainty, Chairman Helge Lund recently announced plans to step down “in due course” – likely in 2026 – following shareholder opposition to the company’s net zero agenda. Lund played a central role in setting the green strategy that failed to win investor support amid surging fossil fuel prices.
Chief Executive Murray Auchincloss, who earlier this year announced a “fundamental reset” of BP’s strategy with over £4 billion in cuts to low-carbon investments, now faces mounting pressure to deliver improved performance. The strategic U-turn has done little to boost the share price, which has underperformed rivals like Shell over the past year.
BP’s first-quarter results, due on 29 April, will be closely scrutinised for signs of a turnaround strategy that might restore investor confidence in this struggling energy giant.