The BP share price is up 18.2% year-to-date and is one of the best performers on the FTSE 100 so far in 2022.
The price of oil has been heavily impacted by scarcity fears since Vladimir Putin’s invasion of Ukraine on 24 February 2022, moving major oil companies such as BP and Shell to suspend their slate of operations in Russia.
The price of oil also jumped 5% on disruption of the Caspian pipeline (CPC) this week, sending scarcity fears surging on the back of yet another layer of complications for global supplies.
The price of Brent Crude hit $119 per barrel in late afternoon trading on 24 March 2022. High oil prices mean BP are currently enjoying the most elevated prices for their products in many years which is likely to lead to a strong set of results for the quarter.
BP Growth Potential
BP shares look primed for further gains in 2022, with shares way off recent highs and current price-to-earnings ratio of 8 and a forward price-to-earnings ratio of 6.1.
The oil producer reported a swing back to profit of £7.5 billion in 2021, reporting its best results in eight years following a devastating loss of £20.3 billion in 2020.
The company has an extremely generous dividend yield of 4.2%, covered 3x.
BP announced a dividend per ordinary share of 21.6c in 2021, amounting to a decline compared to the company’s 26c payout in 2020. The impact of the pandemic meant payouts were curtailed, but investors should look forward to increased dividends going forward.
BP is reportedly set to increase its dividend 4% year-on-year and buy back $4 billion worth of shares until 2025, based on projected prices of $60 per barrel of oil.
The current climate will most likely see the group flush with a surplus of adequate finances to meet its payment goal.
BP Analyst Consensus
The price of Brent Crude is currently at $119 per barrel, and some analysts predict the commodity might exceed heights of $200 over the coming year.
“I don’t think given the way things are going, this is a temporary problem,” Standard Chartered head of oil and gas Alok Sinha commented at a recent Financial Times summit.
“You now have to deal with this as a long term issue which means you need to find alternative supply growth.”
RCMA Group Chairman Doug King weighed in with an estimated price of $250 by the close of 2022.
“This is not transitory. This is going to be a Crude supply shock,” said King.
The spike in Crude oil prices is anything but bad news for BP shares, as the company will benefit from rising scarcity.
“Brent Crude oil at $122 per barrel is going to be a tough one for businesses to stomach as energy costs go through the roof,” says Russ Mould, investment director at AJ Bell.
“It isn’t all bad news as a higher oil price is good for BP and Shell on the UK stock market.”
Rosneft Stake
BP took a hit when it sold off its 19.75% stake in Rosneft on 27 February 2022, which the company owned since 2013 and was valued at $14 billion.
However, the the BP share price quickly rebounded, and the sale of its stake in the Russian-owned operation does not appear to have left any lasting damage on its stock in the long run.
