BP share price forecast: Will energy prices lift the market?

By Capital.com Research Team09:22 (UTC), 31 March 2022

As turbluence characterises the current oil markets BP has further signalled its commitment to alternative energy with a £1bn, 10 year, investment in electric vehicle (EV) charging stations in the UK.

Prices for crude oil have fluctuated significantly in the last few weeks with Brent Crude spot going from $128 a barrel down to $95 and up to $115 in March alone. BP's stiock price has had similar variations and today (31 March) at 377p is 4% off its March peak last week. ,

BP’s EV charging business, bp pulse, said the investment will "deliver more rapid and ultra-fast chargers in key locations, expand fleet products and services, and launch new home charge digital products and services to enhance the customer experience".

Worries over oil supplies - and with it rising prices - continue to grow according to a news report on capital.com. It said that an International Energy Agency’s (IEA) report stated that a global embargo on Russia oil would cause the “biggest supply crisis in decades.” It added: “The prospect of large-scale disruptions to Russian oil production is threatening to create a global oil supply shock.”

What does all this mean for investors?

According to the BP PLC historical share price, (see chart above) BP stock prices have been rising over the past year since falling below 200p in October 2020 at the height of the Covid-19 pandemic. Despite rising to a peak of 417p on 11 February, they remained 39% below the all-time highs of £6.88 reached on 13 April 2006.

In this article, we delve deeper into the company’s latest news and developments, as well as the possible BP share price outlook.

Q4 profit jumps as energy market remains volatile in 2022

BP’s fourth-quarter profit jumped to $2.3bn (€2bn, £1.68bn), up 71.3% from the same period in 2020. The group generated $7.6bn profit in 2021, compared with $20.3bn losses in 2020.

In its Q4 and full-year financial results released on 8 February 2022, BP stated:

“This result was driven by higher oil and gas realisations, higher upstream production volumes and stronger commercial refining optimisation, partly offset by a significantly lower oil-trading result and an average contribution from gas marketing and trading, and the impact of higher energy costs.”

As a result of its strong financial performance, BP has announced $4.15bn in share buybacks and increased dividend pay-outs to shareholders. The dividend pay-out per ordinary share for Q4 rose to $5.46, up by 4% from $5.25 during the same quarter in 2020.

According to BP, the group’s net debt fell for the seventh quarter in a row to $30.6bn in Q4, down 21.3% year-on-year.

BP expects the global “oil supply and demand to move back into balance through 2022; however, with lower levels of spare capacity, price volatility is likely”.

The oil producer has said that the Organization of Petroleum Exporting Countries Plus’s (OPEC+’s) decision on oil production levels will remain a key factor in prices and market rebalancing.

Furthermore, as Ukraine is a key transit hub for natural gas, the Russian invasion of Ukraine could disrupt natural gas deliveries in Europe:

“In gas markets, with ongoing geopolitical uncertainty, and low storage levels, we see the potential for continued price volatility.”

BP also expects the oil industry’s refining margins to remain broadly flat in the first quarter of 2022 compared to the fourth quarter of 2021. BP’s reported and underlying upstream production in 2022 is also expected to remain broadly flat compared with 2021, with oil production to be slightly higher, and gas and low-carbon output to fall slightly.

The group’s $9bn Mad Dog Phase 2 project in the Gulf of Mexico is expected to start up in the second half of 2022, and its Tangguh liquefied natural gas (LNG) expansion project in Indonesia is expected to start its first gas production in 2023.

BP is still making payments for the Deepwater Horizon oil spill and explosion of 2010, so far totalling some $60bn, which it initially agreed to pay in instalments over an 18-year period. The group has said that the ongoing Gulf of Mexico oil-spill payments for 2022 are expected to be around $1.4bn pre-tax.

Its first quarter results for 2022 will be released on 3 May.

BP share price news: accelerating net-zero plan

BP has brought forward its target to halve its operational emissions by 2030, compared with the previous aim of a 30% to 50% cut. The group plans to reach net-zero by 2050 or sooner.

As BP CEO Bernard Looney said on 8 February:

“We are accelerating the greening of BP. Our confidence is growing in the opportunities that the energy transition offers. This allows us to raise our low-carbon ambitions, and we are now aiming to be net-zero across operations, production and sales by 2050 or sooner – unique among our peers.”

The group plans to achieve its net-zero targets in targeting growth in five business segments – bioenergy, convenience, electric vehicle (EV) charging, renewables and hydrogen.

In biofuel, BP “sees opportunity for considerable growth in biogas in the US, Europe and UK”. The group is planning to invest in five major projects, including the conversion of up to two refineries. BP has already completed a six-year programme that delivered 35 projects, including 11 major projects that started production since the start of 2020.

Since 2019, BP has also doubled its EV charging points to more than 13,000 worldwide and plans to expand further to install more than 100,000 charging points by 2030. BP will be focusing on fast and on-the-go charging – almost half BP’s current network is fast or ultra-fast. The group aims to increase the energy sold across its EV charging networks by 100-fold from 2019–2030.

In low-carbon energy, BP said it is on track to meet its target of developing 20 gigawatts (GW) of renewable power capacity by 2025, with 50GW by 2030. Since the end of 2019, the group has quadrupled its renewables development pipeline from 6GW to 24.5GW.

In hydrogen, BP has built a portfolio of options with potential capacity of 0.7 million to 1.3 million tonnes a year.

BP’s accelerated transition to green energy has impressed some investors, including Rupert Hargreaves, who wrote on the investment guide website The Motley Fool on 15 February that:

“What I am really excited about is how the company’s current windfall will help BP accelerate its green transition.

“Based on these targets and the company’s current valuation, I think the BP share price remains an attractive investment. It also looks to me to be a relatively inexpensive way to build exposure to the green energy transition.”

BP and Daimler Truck AG are planning to work together to help accelerate the introduction of a hydrogen network for the decarbonisation of UK freight transport.

They intend to pilot both the development of hydrogen infrastructure and the introduction of hydrogen-powered fuel-cell trucks in the UK.

Under the plans, BP will assess the feasibility of designing, constructing, operating and supplying a network of up to 25 hydrogen refuelling stations across the UK by 2030.

“Complementing this, Daimler Truck expects to deliver hydrogen-powered fuel-cell trucks to its UK customers from 2025,” the company added in a statement.

On 2 December BP announced it had acquired 28.57% stake in Gasrec, an operator of biomethane refueling stations for heavy goods vehicles, which BP will supply renewable biomethane.

On 7 December the energy giant revealed it had acquired US-based AMPLY Power, a provider electric vehicle fleet charging services and energy management solutions. BP says it is looking to expand its operations around the globe

On 3 February BP announced it had acquired a 30% stake in Green Biofuels and that it will work with the company to help decarbonise transport and construction businesses. Green Biofuels’ renewable hydrogenated vegetable oil (HVO) fuels can be used as a direct replacement for diesel

Now, let’s take a look at some of the latest BP stock predictions.

BP stock price forecast

The BP stock may be a bad investment for 2022 according to the algorithmic predictions of Wallet Investor on 31 March, which sees the stock potentially falling to 322p over the next 12 months.

The algorithm-based forecasting service is bearish longer-term, too. It sees the price rising to 234p by the end of 2024 but falling again to 180p by the end of December 2025.

However, the consensus one-year BP stock price target of Wall Street analysts is 463p, according to data provided by MarketBeat, which would represent a 23% premium over today’s price. This is based on eight analysts’ ratings, with the price targets ranging from the high of 700p to the low of 360p.

The consensus rating is ‘buy’, based on the thoughts of eight analysts. Four of them were in the ‘buy’ camp, while four had it down as a ‘hold’.

When looking at BP's future stock price, it’s important to bear in mind that analysts’ forecasts and price targets can be wrong. Analysts’ BP stock-price predictions are based on making fundamental and technical studies of the stock’s performance.

We recommend that you always do your own research, and consider the latest market trends, news, technical and fundamental BP stock analysis, and expert opinion before making any investment decision. And never invest more than you can afford to lose.

FAQs

Is BP stock a buy, sell or hold?

At the time of writing, the consensus one-year BP stock price target of Wall Street analysts is 463p, according to data provided by MarketBeat, which would represent a 23% premium over today’s price. This is based on eight analysts’ ratings, with the price targets ranging from the high of 700p to the low of 360p.

Is BP a good stock to buy?

BP has generated increased profit in 2021 and the group’s market outlook in 2022 is expected to be positive.

However, whether it is a suitable buy or not will depend on your investing goals and portfolio composition, among other factors. You should do your own research and never invest what you cannot afford to lose.

How high can BP stock go?

At the time of writing, according to some analysts’ BP stock projections on TipRanks, the share price could reach a high of 700p and a low of 360p over the next 12 months. However, forecasters can and do get their predictions wrong. You should always do your own research to make informed trading decisions. Keep in mind that past performance is no guarantee of future returns.

When will BP stock go down?

As an oil and gas producer, the BP share price could be affected by several factors, including supply and demand in the energy market, macroeconomics changes such as interest-rate hikes and inflation.

Furthermore, the global energy market is expected to be volatile in the coming months, amid geopolitical tensions, which makes the BP share price forecast for 2022 unpredictable.

Does BP pay dividends?

The BP board will decide if any dividends are payable based on the overall group’s profit. BP declared a dividend of $5.46 a share payable on 8 February 2022, however, please note that not all shares are eligible for dividend payment.