BP shares are up 13.5% in 2023! Should I buy them in March?

BP Shares (LSE: BP) have been an impressive investment of late, up 13.5% year-to-date and an impressive 50.18% over the past 12 months. That compares to an increase of 4.25% and 9.27% ​​respectively FTSE 100 totally.

This will surprise some people. The energy shock caused by the Russian invasion of Ukraine has been felt in everyone’s pockets.

This is a high energy shock

But oil prices have fallen since peaking at $121 a barrel in early June, with benchmark Brent and West Texas Intermediate crude now trading at just $81.63 and $74.65 respectively. The drop is about a third. With wholesale natural gas prices also falling sharply, BP’s popularity isn’t just down to energy price spikes.

One explanation is that investors are no longer afraid that BP could get caught up in the energy transition. If the past year has shown us anything, it’s that we still need fossil fuels. Our social and economic stability is based on ready supply.

If BP and fellow FTSE 100 major oil shell pull out of fossil very fast, dirty producers from countries with weak regulations will rush to plug the gap, and the planet will be a net loss.

BP’s recent results have certainly impressed investors. It more than doubled annual profit to a record $27.6bn, and treated shareholders to a $2.75bn share buyback, funded from Q4 excess cash flow of $5.1bn.

A long-standing concern about buying shares in BP is that the company is subject to oil prices, which it has no control over. I remember how the stock fell below 200p during the pandemic lockdown, when oil briefly touched $20 a barrel. It’s 549 today.

But the price of oil must fall by half for BP’s problems, as the break-even point is now around £40 per barrel, due to cost reductions during the last collapse. With oil prices expected to be between $90 and $100 per barrel this year, the good times should continue into 2023. Especially when China’s economy reopens after the Covid lockdown.

Still a FTSE 100 earnings hero

BP results are disappointing compared to the days when 5% or 6% was routine. Today, it yields 3.7%, but is still on the way back, with management increasing its regular dividend by 10%. Next year, BP’s earnings are expected to reach 4.6%, covered by 4.1 with earnings. It’s rare to see a major FTSE 100 stock with such a large cap (although Barclays have walked close).

BP’s net debt has now been cut for the 11th quarter to $21.4bn, easing other long-standing investor concerns. The threat of a UK windfall tax seems also overdone. The North Sea accounts for less than 10% of BP’s global profits. The UK energy revenue levy will cost the group £700m, but this is a fraction of the $15bn global tax bill.

I have only one major concern today. I can not afford to buy every FTSE 100 Stock I take a shine, and one filter I apply to buy them when the shares are down instead of up. On that basis alone, I wouldn’t buy a BP high-flier in March. BT Group and Unilever both offer superior recovery possibilities, in my view, and I will prioritize the two laggards instead.