BP Exits Petrochemical Business in $5 Billion Deal--3rd Update
By Sarah McFarlane
LONDON -- Energy giant BP PLC has agreed to sell its
petrochemicals business to British chemicals company Ineos Ltd., in
a $5 billion deal that will help reshape its business for the
global transition to lower-carbon energy, BP said Monday.
The deal could help BP pare its relatively high debt load and
separates the company from its peers, as Royal Dutch Shell PLC and
Exxon Mobil Corp. have been expanding their petrochemicals
businesses. BP said it would have taken considerable investment to
enlarge the division, which is smaller than its peers'
Petrochemicals are expected to be the largest driver of oil
demand in the coming years, making up more than one-third of
oil-demand growth to 2030, according to the International Energy
BP and Ineos first proposed the deal several years ago and
discussions were reignited in recent months, according to people
familiar with the matter. The companies didn't use advisers for the
Ineos, one of the world's largest petrochemical companies,
bought the bulk of BP's petrochemicals business in 2005 for $9
It is the first multibillion-dollar deal by an oil major since
the new coronavirus caused companies to cut costs and scale back
investment plans. The oil industry faced a double blow of increased
production from Saudi Arabia and a collapse in demand. Oil prices
have lost more than one-third of their value since the start of the
Earlier this month, BP said it was cutting 14% of its global
workforce and would take a write-down of as much as $17.5 billion
on its asset values, accelerating existing plans to reshape the
company after the coronavirus pandemic's crushing impact on oil
Bankers said they expected deal activity to be focused on
infrastructure and refining and processing assets as companies were
reluctant to sell oil and gas fields at a time when energy prices
were under pressure.
"This is another significant step as we steadily work to
reinvent BP," said Bernard Looney, the company's chief
Mr. Looney, who took the helm in February, had been crafting a
yet-to-be revealed reorganization plan, due to launch in
BP's shares were up 3.4% in London on Monday.
The deal means BP has reached its divestment target of $15
billion of asset sales a year earlier than planned. Among the major
oil companies, the company has one of the highest levels of debt in
relation to its size.
In April the company said that its gearing -- the ratio of net
debt to the total of net debt and equity -- rose to 40% including
leases, from 35% in the previous quarter. The company targets
20%-30% gearing but expects the level to remain above 30% into
"The deal goes some way to fill the cash-flow deficit faced by
BP," said Irene Himona, managing director for oil-and-gas equity
research at Société Générale.
As part of the deal, Ineos will pay a deposit of $400 million
and $3.6 billion upon completion, which is expected by the end of
the year. The $1 billion remainder will be paid by the end of June
Ineos was founded in 1998 and is majority-owned by British
billionaire Jim Ratcliffe, one of the U.K.'s richest men. Last
year, it bought two polystyrene plants in China from French energy
company Total SA.
Ben Dummett contributed to this article
Write to Sarah McFarlane at email@example.com
(END) Dow Jones Newswires
June 29, 2020 12:30 ET (16:30 GMT)
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