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BP Stock Is A Good Buy In 2021

Mar. 08, 2021 3:27 PM ETBP p.l.c. (BP)CNQ, SU, SU:CA, CNQ:CA76 Comments


  • BP has endured numerous challenges over the past decade and is currently pivoting its business model.
  • This leaves investors rightly skeptical about BP's investment merit going forward.
  • However, a look at the company's valuation and dividend suggest that BP's stock still holds considerable appeal.
  • Looking for a helping hand in the market? Members of Ian's Insider Corner get exclusive ideas and guidance to navigate any climate. Learn More »

BP (NYSE:BP) has suffered a rough decade:

Shares have lost nearly half their value over the past decade. That's a poor performance even compared to other oil and gas majors, let alone against the broader S&P 500. The Deepwater Horizon disaster certainly caused a large part of that, but even in recent years, the company has struggled to gain much traction. BP's lackluster performance turned into a full-on collapse last year, as shares plummeted from $36 to $15 during the pandemic.

However, BP stock has started to mount a recovery. Shares have rallied 30% year-to-date and are approaching their highest levels since June 2020. This has come at the same time as a huge rally in the price of crude oil. With vaccine distribution rapidly gaining steam, it seems that BP and the other major energy companies are finally heading for a period of outperformance against the rest of the stock market as energy use rebounds.

Not all oil and gas companies are created equally, however. BP has differentiated itself from most of its energy rivals. Thus, does the stock make sense for investors -- in particular dividend investors -- today?

BP Is Speeding Into Renewable Energy

One thing that really distinguishes BP from its rivals is that it is going full-on into renewable energy. Most major oil companies are making some noise and modest investments into renewables. That's largely a requirement given the current political environment.

However, BP is going far beyond just paying lip service to the idea. BP has announced plans to slash its oil and gas production by 40% over time.

Instead of relying on its traditional fossil fuel-based business, BP plans to replace those income streams with green-powered profits. The company is going into all sorts of renewable businesses, ranging from traditional clean power generation

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This article was written by

Ian Bezek profile picture

Ian Bezek is a former hedge fund analyst at Kerrisdale Capital. He has spent the decade living in Latin America, doing the boots-on-the ground research for investors interested in markets such as Mexico, Colombia, and Chile. He also specializes in high-quality compounders and growth stocks at reasonable prices in the US and other developed markets.

Ian leads the investing group Ian's Insider Corner. Features of the group include: the Weekend Digest which covers everything from new ideas to updates on current holdings and macro analysis, trade alerts, an active chat room, and direct access to Ian. Learn More.

Analyst’s Disclosure: I am/we are long BP, CNQ, SU. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (76)

fortbrepoels profile picture
BP have a good differend possition in all energy for the moment and cash !
02 Apr. 2021
It is just doing what it sees as sensible. Though oil and gas will always be needed/used their own forecasts and wider political/social pressure suggests a considerable drop in amount required so they are merely putting their profits to what they think is better use by developing long-term assets in what it sees as the future in a market it hopefully understands. Letting my dividends re-invest with a view (hopefully) to good income in future particularly from on-shore wind plus solar as once they are up and running the ongoing costs are low.
There must now be hundreds of hopeful companies with hundreds of $B of hopeful investors' money, all expecting to make "8-10%" returns from renewable energy projects. Not going to happen. Wind+solar electricity is a commodity that will get commodity pricing, but unlike other commodities it is essentially unlimited - you can keep adding capacity as long as the dollars flow.
Wind+solar electricity is a far less valuable product than conventionally generated electricity because it comes in random amounts at random times, not when customers actually need it. And those times when you have a lot of your product to sell are exactly the same times as your competitors have a lot to sell, so spot prices fall through the floor, even going negative (already happens frequently in Germany, and increasingly in Southern California). This effect will get worse and worse as capacity is added.
Cubazona profile picture
@Bacon Slicer What do you think about the growth of battery capacity? Do you think this will make a difference in the future as to the stability of profits in renewables?
AvgWeirdo profile picture
@cdhernandez Of course battery capacity will change things, but even then you will have to have the infrastructure built to quickly do battery changes. Today if you take a 1000 mile trip in with an ICE engine it takes 15 mins or less to refuel your vehicle. Battery changes will have to be able to take place in a comparable amount of time to make EV vehicles competitive.
Cubazona profile picture
@AvgWeirdo With respect, Tesla super chargers can charge up a car in 30 minutes, for a fraction of the cost. Where there is a problem with these superchargers is how they will affect the battery life over all.
In BP at 15.93 and agree with the article on the value. 29 is fine with me.
riki3742 profile picture
@docstox 12 16.47 here, most likely will sell if it gets near $29
Good trade working there. Figuring around that as well, but will analyze the chart when and if it does get there to see what the technicals say.
riki3742 profile picture
@docstox 12 agree, I will do the same, too lazy to spell out what you said in your response..

In the meantime I'll keep collecting the divvy.
Robert QSLV profile picture
Twice Burnt?

I'll hold on to the 100 shares I already got hosed on and wait for a reasonable exit point. Who wrote this? I smell a fish.
Preparation will give BP a head start, now it is lean if not mean and can face the challenges of the Big T. Trinidad will continue to deliver but may need Gas from Guyana to feed Atlantic trains.
Paul of Arabia profile picture
Having worked in renewables and oil and gas the much higher rating of the new large wind turbines reaching 15MW for offshore WFs will be a game changer. Its in GW scale where the money will be made. Much of the learning from mistakes in North Sea have been made. It might be a good time to make what will be a very slow transition by big oil to renewables as most European countries are banning new cars with ICEs from 2030.
@Paul of Arabia
What is the lifetime of the offshore WF's and do disposal present problems?
@Paul of Arabia The new 14MWh turbines have an estimated LCOE of about $68/MWh (Rystad Energy), whereas existing gas combined-cycle is around $36/MWh (EIA).
Add in the cost of energy storage and maintaining backup generation for when the wind doesn't blow and you could soon be talking about real money...
Paul of Arabia profile picture
@Bacon Slicer - 15-20MW offshore turbines in the North Sea GW OWFs (Dogger Bank and North Norfolk Sands) are slated to have LCOE of $38-48 per MWhe. Their capacity factor will exceed that of existing OWTs. The millions of evs connected by 2040 will solve the short term storage issue for grid frequency support with smart inverters and metering. Also solar is critical as still cold winter sunny days coincide with max solar efficiency. Gas turbines such as efficient CCGTs will always be required to fill the gaps but the input fuel cost will vary their LCOE significantly. Their fuel cost tends to peak in winter from domestic demand, when the CCGT peak lopping is mainly required.
I've held this for a long time and it has been a huge disappointment. Hope better things are to come.
What does BP know about green energy? If I wanted that, there are plenty of better stocks to choose from. I'm just waiting for BP to go back to where I bought it, then I'm out.
Cuip99 profile picture
Nope. I bailed out of BP. They changed their business model and thus are making less money now days. Let them go charge EVs. They are trying to set up big solar operations in Louisiana (and I guess a lot of other places too). I will stick with oil and XOM.
Skyfall7 profile picture
@Cuip99 smoke & mirrors, just PR. In time being clue. In meantime They are still pumping loads of oil & will continue to do so while playing the good greenie guys!
@Skyfall7 BP was a decent stock for me, not a apple or Tesla, but not bad at all. I bought some oil stocks like BP and a few more at rock bottom $$ and did ok. BP had good divs, low ADR fees so can’t complain. I wouldn’t have a problem buying again.
Skyfall7 profile picture
@Toddfedex results were great, fact they made so much just trading & shipping oil, points to strong management. They won’t get out of oil for many many years. But right thing to do , keep options open , make the right noises etc. slow moves to green. Tullow oil going great guns too.. loads of recovery room.
I am in AP's boat unfortunately. New money? Why not buy the FAN companies who have the technology & experience in renewables.
Ian Bezek profile picture
@stmbtdon Because BP still generates $20 billion a year in cash flow off its existing oil and gas whereas FAN companies lose money.
@Ian Bezek So you are suggesting they get out of the O&G business that they are clearly poor at (while still making $20 billion a year in cash flow)... to get into the renewables business where those who are good at it ... lose money??? Sounds like a path to liquidation to me....
AtalantaPonos profile picture
@Ian Bezek Thank you for the reassuing article. I have been a buy-and-hold-and-buy owner of the stock since before the Deepwater Horizon catastrophy. I've been buying all along the ride down in price. It hasn't been fun, but I bought the shares initially because of the companies "Beyond Petroleum" advertisements a long time ago. I still believe in the company, and with their philosophy and money, the company should be able to do good things. I am envious of buyers investing in BP at this stage of the game. The road ahead will be long but profitable.

May all your investments pay many dividends!

Turning BP into a clean energy company is a huge risk and will require enormous resources. Considering their high debt level, my expectations are that they will not increase their dividend in any meaningful way to address the shift in business and to manage their debt. I am going to slowly reduce my position as my original investment was an investment in an oil and gas company and the risks and rewards related to that type of energy. Investing in a company that is shifting away from oil and gas is a different type of investment.
fortbrepoels profile picture
we have now a olie price from 70$ , that change the picture for RD, BP and TOT now
Have a few round lots. Am a fan of this difficult business.
Bought a bunch a month ago
Shoud have bought more, but I also own a lot of CVX and other oils . 2021 will be the year for oils
Until the Texas boys get back in the game.
Moats and Income profile picture
Can only hope BP and RDS pps goes up enough for me to bail on these losers...

These mgmt teams have destroyed shareholder value for years to come..there are much better stock yields available with limited to no growth.

These companies are EU puppets and will mostly miss the predictable recovery in oil prices/revenue and mostly importantly overall profit as they plow capital into money losing renewables...
Why buy a company committing suicide? Only future is govt mandated stupidity and tax credits.
All the european oil companies are transforming towards toward renewables,is it wise ? Most likely its the speed in which they are trying to do it that borthers me.
purpleboarder profile picture
@coinman507 I'm hoping the dirty secret to the Euro Energy companies' success is nuclear. France is leading the way w/ 70% of it's energy from this clean resource.
Thunder12 profile picture
@purpleboarder lol france is 75% nuclear power, never going to fly here. The world is not leaving fossil fuels anytime soon. If anything will will be using more as time goes on.
Skyfall7 profile picture
@coinman507 BP a plc and U.K. out of EU now.
Interesting take, but I REALLY want to get out of fossil fuels and am already long: XOM, RDS.B, EOG, COG, and PSX, not to mention some midstreams. Can't see adding at this time, though I see more short to medium term upside for the complex.
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