CHONGQING, CHINA – JULY 31: In this photo illustration, a smartphone displays the logo of BP plc (NYSE: BP), a British multinational oil and gas company, in front of a screen showing the company’s latest stock market chart on July 31, 2025 in Chongqing, China. (Photo illustration by Cheng Xin/Getty Images)
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BP plc stock (NYSE: BP) has increased approximately 15% year-to-date, which is slightly better than the S&P 500’s 12% rise. Recently, the stock has attracted attention due to a significant oil discovery at the Bumerangue prospect offshore Brazil—its largest in approximately 25 years, estimated at 2–2.5 billion barrels. Furthermore, a preliminary agreement with Egypt’s EGAS may lead to the development of five deepwater gas wells in the Mediterranean, connecting to existing infrastructure.
Trading around $34 per share, BP’s leading performance appears appealing, but the underlying narrative is more complex. Strategic adjustments, varied earnings, and shifting energy goals indicate that the stock warrants both caution and curiosity. With energy prices rising, BP’s extensive oil and gas operations—and renewed emphasis on upstream production—could lay the groundwork for a possible recovery. We explore the details further below.
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Q2 2025 Results: Mixed but Resilient
BP reported a Q2 underlying profit of $2.4 billion, a decrease year-on-year but above expectations, as strong trading and fuel margins compensated for weaker upstream realizations. Segment results varied: Gas & Low Carbon Energy benefited from enhanced trading and growth in volumes, Oil Production & Operations suffered from lower realizations and increased depreciation, while Customers & Products expanded due to fuel margins and oil trading.
Looking forward, upstream production is anticipated to decline slightly, while downstream will benefit from seasonal demand and fewer maintenance turnarounds. BP ensures at least 4% annual dividend growth and aims to distribute 30–40% of operating cash flow, indicating a continued commitment to shareholder returns.
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Valuation: A Discount?
BP is trading at approximately 0.5x price-to-sales (P/S). Historically, the stock’s P/S ratio has fluctuated between 0.24x and 0.80x, suggesting that BP is trading below its recent average—but not at a severe discount.
In comparison to its peers, BP appears even less expensive. Exxon Mobil (NYSE: XOM), Chevron Corporation (NYSE: CVX), and Shell PLC (NYSE: SHEL) trade at P/S multiples ranging from 0.7x to 1.5x. The lower multiple reflects investor apprehension surrounding BP’s strategic transitions and mixed earnings. However, if the company successfully implements upstream projects, divestures, and disciplined cash returns, the stock may experience significant appreciation. Nonetheless, fluctuations in commodity prices and regulatory risks remain vital considerations.
Strategic Pivot: Oil & Gas Takes Center Stage
BP is scaling back its renewable initiatives and increasing its focus on oil and gas, responding to shareholder demands for higher cash returns. U.S. onshore wind assets have been divested, and approximately $5 billion has been cut from the clean-energy pipeline. Activist investor Elliott Management has advocated for improved free cash flow, strict cost management, and more assertive capital returns. BP is refining operations—reducing workforce, divesting lower-return assets, and concentrating on upstream production.
This represents a significant shift from 2020, when BP aimed to reduce oil output by 40% and accelerate its renewable efforts. As oil prices recovered and renewable returns lagged, the company reverted to fossil fuels. BP now aims for 2.5 million barrels of oil equivalent per day by 2030, up from just under 2.4 million. Concurrently, competitors like Exxon and Chevron are targeting high-margin oil while selectively investing in carbon capture, hydrogen, and biofuels—striking a balance between returns and the energy transition.
Hydrogen Plays Still On the Table
Despite a reduction in renewables, BP has not completely abandoned its clean energy aspirations. Hydrogen remains a focal point. BP intends to develop 5–7 hydrogen and carbon capture projects globally. This includes collaborations with Iberdrola for a 25-megawatt green hydrogen project in Spain and Cummins for a 100-megawatt electrolyzer in Germany, projected to generate 11,000 tons of green hydrogen per year by 2027. BP is also working on H2Teesside, one of the U.K.’s largest proposed blue hydrogen facilities.
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