The BP (LSE:BP) share price has been volatile in 2025, influenced by strategic shifts, geopolitical factors, and activist investor involvement. So here’s a breakdown of the key developments.
Activist pressure and a new strategy
Activist hedge fund Elliott Management acquired a significant stake in BP in early February. The group’s pushing for strategic changes to unlock shareholder value. This has led to a 6.5% surge in BP’s shares, as investors anticipate a refocus on oil and gas production, similar to Shell’s strategy.
However, BP’s already announced a fundamental reset to its strategy, slashing investments in low-carbon projects by over $5bn annually and increasing oil and gas spending to $10bn a year. The goal is to boost production to 2.3-2.5m barrels per day by 2030, targeting higher free cash flow and returns. This late February however, initially caused shares to drop, as it marked a departure from BP’s earlier green energy transition plans.
Moreover, BP plans $20bn in divestments by 2027, including a strategic review of its Castrol lubricants division. It also aims to reduce net debt to $14bn-$18bn by 2027, down from $23bn in 2024. These measures are expected to enhance shareholder value. The business has broadly lagged its peers in terms of creating shareholder value in recent years.
Geopolitics and global energy prices
The US Energy Information Administration predicts average oil prices of $74 in 2025 and $66 in 2026. This is a little lower than we’ve seen in recent years and could pressure BP’s forecasts. Inevitably, lower oil prices push stocks in the energy sector downwards.
Additionally, President Trump’s executive orders aim to boost US oil and gas production. This adds uncertainty to global energy markets with prices in a fine balance. Meanwhile, ongoing conflicts, such as Russia’s war in Ukraine and Houthi attacks in the Red Sea, continue to disrupt oil supply chains, influencing crude prices and BP’s outlook.
In other words, there’s a lot of competing factors, but the forecasts suggest oil’s getting cheaper.
An investment worth considering?
I’m relatively bullish on energy stocks in the long run. However, BP presents a mixed investment case in 2025, with its strategic reset offering both opportunities and challenges. The strategic reset, coupled with planned cost reductions of $4-5bn by 2027, could improve profitability. However, there are execution risks.
Moreover, BP’s valuation remains a sticking point. While cheaper than US majors like Exxon Mobil and Chevron, it trades in line with European peers such as Shell. Its exposure to higher European taxes and stricter regulations may limit its ability to close the valuation gap. Additionally, the downstream segment’s reliance on cost efficiency improvements could take time to show results.
Analysts forecast a modest total return of 11.9% annually through 2030. This could make BP a steady but not compelling buy at current levels. However, it’s not beating earnings estimates all that often, and the Trump presidency represents something of a wildcard.
Personally, I’m not investing in this uncertainty. Bullish investors might consider waiting for a market dip or crude price drop before adding to positions.
