Even though the share price of British Petroleum rose by 8% in the past month, the overall share price of the British giant is still lagging by 20% in comparison to last year. Adding to investor concern is the fact that British Petroleum’s valuation has gone down by almost 45% in the last decade.
Paris, France, July 12, 2016 — The oil and gas giant has been weakened by numerous crises, which have in turn weakened the verve of investors in the global resource play.
The oil crisis, which the country has been facing for some time, continues. Although the price of oil has shown some hike and has risen above its recent low, it has not recovered sufficiently. The Oil prices were expected to perform better as the demand from new economies is increases. A low oil price has affected British Petroleum negatively, decreasing its profits considerably. After a tough 2015, the current situation will exert even more pressure on British Petroleum in the present year.
The Deepwater Horizon disaster and Russian sanctions were similar to the current low oil price crisis. While both the aforementioned crises hurt British Petroleum’s share prices, the former had British Petroleum pay billions of dollars as compensation. It is unlikely that the effect of these three crises will last forever — however, investors are dejected and have lost faith in BP’s stock. The faith of investors has been affected even more negatively by the fact that British Petroleum’s competitors have done much better in the recent years.
Things are not necessarily as bad as they look for British Petroleum. Its current strategy, which revolves around reducing costs and creating a lower oil price environment, has caused its earnings to increase. In the next fiscal year, it is estimated that British Petroleum will be able to achieve an increase of 124% on its bottom line. This turnaround has the potential to change investor sentiment. This now seems even more plausible because British Petroleum’s shares offer a price to earnings growth ratio of 0.1. BP’s shares now offer an uncommon growth potential.
It has been predicted that the total energy usage will increase exponentially in the near future. This predicted trend hasn’t impacted the prices of oil as yet because the supply of oil has increased notably. Since many companies have announced their intention to cut their exploration and investment, the future of oil prices looks good.
Steve Rogers of Orix Capital Trading says, “There is no denying that investment in British Petroleum looks risky now as the price of its shares depends largely on the future of oil prices. However, British Petroleums shares offer an undeniably sound asset base and good value for money. Since the future of oil industry looks positive, the present may be a good time to let go of past crises and invest in BP shares as these are capable of producing decent profits in the long run.”
Orix Capital Trading