Back to black: can a refocus on fossil fuels save the BP share price?
After refocusing on its core oil and gas business, the BP (LSE: BP.) share price is showing signs of resilience. The stock’s up 6.8% this year, trading around 422p, with a market-cap nearing £65bn.
After years spent championing a green transition, its strategy’s taken a sharp U-turn in 2025. The FTSE 100 energy giant now appears to be returning to its roots â prioritising oil, gas and cash generation.
It’s a shift thatâs provoking intense debate among investors about whether BP can balance profitability with sustainability.
The shift under Auchincloss
Under CEO Murray Auchincloss, BP’s slashed planned renewable investment by more than £3.75bn. Redirecting capital toward fossil energy, its annual spending on oil and gas has been boosted to about £7bn.
Itâs now going ahead with a major offshore drilling project, Tiber-Guadalupe in the Gulf of Mexico, which aims to produce 80,000 barrels a day. Meanwhile, itâs abandoned earlier ambitions to reduce oil production by 40% by 2030.
The logic’s clear: stronger near-term cash flow, better returns, and rewards for shareholders via buybacks and dividends. This marks a notable pivot from the approach championed under Bernard Looney, which emphasised a fast transition toward renewables.
The financial impact
Consequently, cash flow’s bounced back — recent quarterly operating cash has exceeded £6.7bn. The company also announced a £1.75bn share buyback and kept its dividend payments intact.
In valuation terms, its metrics now more closely mirror those of traditional energy peers. Its forward price-to-earnings (P/E) ratio’s 12.5 and the dividend yield remains an attractive 5.8%.
The market response has been cautiously optimistic, with the share price steadying after lagging more aggressive peers like Shell.
Trade-offs: climate risk vs cash rewards
Cutting back investment in clean energy may boost profits today, but it increases long-term climate, regulatory and reputational risks. Several ESG funds have already pared back exposure to companies seen as deprioritising the energy transition.
BP could face steeper carbon taxes or less favourable access to green financing. Plus, underinvesting in renewables may leave it exposed as the world shifts toward lower carbon.
On the flip side, investors chasing income may find this renewed emphasis on fossil fuel cash flow more compelling. Notably, major players including Shell, ExxonMobil and Chevron have also shifted focus back toward oil and gas, reflecting a broader industry realignment.
But other concerns remain, including oil price volatility and shifts in climate regulation policy. Not to mention, the risk its pivot away from renewables can erode long-term competitiveness.
Despite the divergence, BP says it will continue to maintain some presence in low-carbon areas such as biofuels and electric vehicle (EV) charging. I think investors need to weigh whether this repositioning offers sustainable income or merely short-term gains.
Final thoughts
BPâs move ‘back to black’ might help rejuvenate cash flow and lift returns in the short term. But it undeniably introduces trade-offs around climate strategy and future optionality. The real question for investors is whether the company can balance profit with progress.
As a shareholder, Iâm somewhat disheartened but remain optimistic. Maintaining a focus on renewables would be ideal, and clearly, a more sustainable solution is required.
For those committed to greener approaches, there are certainly other FTSE names worth considering. But for income-oriented investors, BPâs shift is a bold repositioning that makes it worth considering.
The post Back to black: can a refocus on fossil fuels save the BP share price? appeared first on The Motley Fool UK.
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Mark Hartley has positions in Bp P.l.c. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
