Please ensure Javascript is enabled for purposes of website accessibility

BP Agrees to Sell Its Petrochemical Business for $5 Billion

By Matthew DiLallo – Jun 29, 2020 at 9:07AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The oil giant is now on track to achieve its $15 billion asset sale target.

Oil giant BP (BP -0.70%) has agreed to sell its global petrochemicals business to leading chemicals company INEOS for $5 billion. The sale caps the company's plan to monetize $15 billion in assets, which it has now achieved one year ahead of schedule. The cash proceeds will enable the oil company to further strengthen its balance sheet and continue its strategic reimagining. 

INEOS will pay BP a $400 million deposit for the petrochemical assets and another $3.6 billion when the deal closes, which the companies expect will happen by year-end. INEOS will pay the remaining $1 billion in separate installments of $100 million in March, April, and May of 2021 and the remaining $700 million in June of next year.

Two people shaking hands with an energy facility in the background.

Image source: Getty Images.

BP deemed these assets as nonstrategic since there was limited overlap with the rest of its businesses. Furthermore, the company also would have needed to invest a lot of money to grow these businesses, which would have taken capital away from other opportunities that are more aligned with its strategic direction.

Meanwhile, the $5 billion cash infusion will enable BP to bolster its balance sheet, which has come under pressure due to this year's crash in crude prices. The company recently unveiled plans to write down as much as $17.5 billion in assets due to its belief that energy prices will remain low for a sustained period. That view caused some concerns that BP might need to reduce its dividend, which has seen its yield rise into the double digits on sustainability concerns. But this sale should help ease some of those worries as it will relieve some of the company's balance sheet pressure.   

Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

BP p.l.c. Stock Quote
BP p.l.c.
BP
$28.55 (-0.70%) $0.20

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
326%
 
S&P 500 Returns
102%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/03/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.