The BP (LSE:BP) share price continues to perform well this year, having reclaimed much of its Covid losses over the past four years. In fact, it’s climbed from a low of £1.96 in late 2022 to £5.12 today. 

That’s an annualised return of almost 32% per year.

I can’t think of many other FTSE 100 stocks with that kind of return (except maybe Rolls-Royce, with an incredible 95% annualised return in the same period!)

How’s the wider industry looking?

Let’s be honest, oil companies haven’t had the best of luck lately. From climate protests and zero-emission targets to supply issues and conflicts in the Middle East, a lot is going against them. Both Shell and BP have been battling with strict EU regulations pushing for renewable energy adoption. 

So much so that Shell is considering a move to the US, where CEO Wael Sawan last year enjoyed a warm reception at the New York Stock Exchange (NYSE). While it’s unlikely that BP would follow suit should that happen, it has sent shivers through the UK market. BP is down 2.43% since Sawan reiterated last week that he is “open to all options” to improve Shell’s prospects.

Renewable transition goals

BP does perform somewhat better than Shell on its environmental, social and governance (ESG) score. It aims to reduce its carbon output by 15-20% by 2030, with a goal of net zero by 2050. It’s also pledged to invest $6bn-$8bn into transitioning to renewables by 2025, increasing that number to $7bn-$9bn by 2030.

On the governance side, I personally feel that £8m a year compensation is a bit high for newly-appointed CEO Murray Auchincloss – particularly since earnings have declined since he took office in January this year. It doesn’t exactly reinforce the belief that the company is fully focused on its environmental goals.

What do the number crunchers think?

Brokers offer a mix of opinions on BP, with a hold from Berenberg and an underweight rating from JPMorgan. But analysts from both RBC Capital and Jefferies recently reiterated their buy rating for BP, with targets of £6 and £5.70, respectively. A quick browse on various other analysis sites and I can see similar targets – overall, sentiment seems good.

But while the price has been increasing steadily, there’s no guarantee that will continue. Fortunately, BP has a relatively good dividend yield of 4.39%, so even without price growth, there’s value in the stock. The quarterly payments have been reliable and consistent for the past 10 years, although they were reduced by around 50% when Covid hit.

So what’s the bottom line?

I’ve recently been considering restructuring more of my portfolio towards BP following the worrying news from Shell. While I do feel Shell deserves better prospects, I don’t think a move to the US is the solution.

I’m not 100% sold on BP’s future prospects either, but I like the dividend yield. I also feel fairly confident that the price has more chance of growing than falling. I wouldn’t buy more of the shares right now but I’m happy to hold the ones I have.