BP (LSE: BP.) shares have always swung in time with the oil price. So with Brent crude dipping to $68 a barrel in recent days, it’s no real shock to see the BP share price drifting too.

Over the last 12 months, the FTSE 100 stock has slid more than 12%. Even with a trailing yield of around 6%, investors would still be in the red.

The company is under pressure from just about every direction right now. US activist fund Elliott recently slammed its “chronic underperformance” and stepped up its campaign for a strategic reset and “decisive and effective leadership” to get BP back on track.

That came as BP named Albert Manifold, the former CRH boss, as its new chairman. His appointment has sparked speculation that the oil giant could one day follow CRH’s example and shift its listing from London to New York, although CEO Murray Auchincloss insists that isn’t on the cards.

Soft earnings

In February, Auchincloss junked BP’s green transition. He’s looking to offload $20bn worth of assets by 2027 to reverse its green shift and pay down debt, with up to $4bn expected this year. BP has already sold its US onshore wind business and scaled back on renewables, in an effort to focus on core production and cut out low-return projects.

BP also hopes to lift daily output to 2.5m barrels of oil equivalent by 2030, while cutting headcount by 5%. Yet the results won’t show through for some time.

On 29 April, BP halved its Q1 share buyback to $750m, citing volatile oil prices. Donald Trump’s tariff threats didn’t help. On 11 July, it warned second-quarter earnings would take a hit from weaker oil and gas prices, despite slightly higher upstream production.

Warped valuation

One of the strangest numbers is the current price-to-earnings ratio. BP’s price-to-earnings ratio has rocketed to a jaw-dropping 225. That’s down to a steep drop in earnings per share, which collapsed from 88 cents to just 2 cents in 2024. Unless earnings recover, its dividend and share buybacks could come under further pressure, with inevitable collateral damage to the share price.

While some investors might consider buying BP for the generous dividend and long-term recovery potential, there’s no disguising the risks. Takeover speculation may tempt some, but not me. All too often it comes to naught.

Of the 32 analysts covering the stock, 18 rate it a Hold. That feels about right to me. The company looks unsure of its direction, and with the global economy slowing, oil demand could stay subdued.

If BP can deliver higher production and better earnings, the shares might eventually rebound. But I think there are far stronger FTSE 100 dividend stocks out there to consider today, with a lot less baggage.

Given the huge range of challenges BP faces, I’d expect its share price to trail for some time. At some point, the shares could fly, but today I’d approach with caution.