BP (LSE: BP) shares have had a strong start to the year, climbing about 30% since January as investors warmed back up to oil and gas stocks. More recently, though, the price has slipped roughly 7% from its peak.

Naturally, that raises doubts for existing shareholders. Is this just a short‑term correction after a big run, or the start of a deeper slide?

New exploration push in Egypt

One big part of the growth story is BP’s role in Egypt’s new five‑year oil and gas exploration plan. The country aims to drill around 480 new exploratory wells over the period, with total investment of about $5.7bn, and 101 wells scheduled for 2026 alone.

If the project is successful, it will lead to new production and boost cash flow – but only if it manages to hit commercial volumes.

For long‑term investors, this is important. It shows BP is still willing to invest heavily in traditional hydrocarbons, even as it talks about the energy transition and lower‑carbon projects. If oil and gas prices stay reasonably firm, this fresh development could be very profitable.

Looking at the numbers

The company’s most recent results were messy, though. Earnings have fallen sharply, down more than 100% year on year as one‑off charges and weaker refining margins dragged profits into the red. In simple terms, BP moved from a healthy profit to a bottom‑line loss over the last 12 months.

On valuation, the shares trade on a forward price‑to‑earnings (P/E) ratio of about 13. That is not outrageous, but it is no longer ‘bargain basement’ either – especially with earnings under pressure.

Plus, the company’s return on equity (ROE) is barely positive at around 0.12%, suggesting that management is currently squeezing only a tiny return from shareholders’ capital.

But on the income side, the dividend yield of 4.4% remains attractive, as it’s higher than many UK blue chips.

The balance sheet, however, still looks tight. BP carries a fair chunk of debt, with a debt‑to‑equity ratio around 1.37, and rising interest costs leave less room for error if oil prices fall back or big projects run over budget.

Risks to keep in mind

There are several obvious risks here. BP is still highly exposed to swings in oil and gas prices, which depend on global growth, OPEC decisions, and geopolitical shocks.

At the same time, the global push towards cleaner energy could slowly limit demand for fossil fuels over the next couple of decades. Not great at a time when BP is committing more capital to long‑lived projects like Egypt.

So, should I buy more?

Personally, I can still see a strong case to consider BP as a long‑term holding. The Egypt program and other projects could support growth, and the dividend remains appealing for income.

But with earnings down 116% year on year and the balance sheet stretched, I am not rushing to add after a 30% rally. For now, I am happy to hold and watch how profits, debt levels, and new projects develop before buying more.

Whatever your view on BP, diversification is key. Oil might be doing well now, but it pays to hold stocks from a wide range of sectors. That way, you’re not risking everything in one area.