BP has agreed to sell its petrochemicals business to Ineos for $5bn as the UK energy major seeks to strengthen its balance sheet and become a more streamlined entity under its new chief executive.
The move to bolster its finances comes as the energy sector takes a significant financial hit triggered by the coronavirus pandemic. BP reported a 66 per cent drop in earnings and a rise in debt in the first quarter as crude demand and oil prices collapsed.
Bernard Looney, BP’s chief executive, said the petrochemicals unit’s strategic overlap with the rest of the company was “limited”, and “it would take considerable capital for us to grow these businesses”.
“As we work to build a more focused, more integrated BP, we have other opportunities that are more aligned with our future direction,” he added.
Ineos will pay a deposit of $400m and a further $3.6bn when the deal is expected to complete by the end of this year. An additional $1bn will be deferred and paid in three instalments by mid-2021.
At the start of the year BP was confident it could generate more cash and increased its dividend payout. But an unprecedented oil price crash has forced it into cash conservation mode and made it accelerate plans to “reinvent” itself for the future.
The company has said it will cut capital spending by $3bn, defer some exploration and appraisal activities and reduce costs by $2.5bn by the end of next year compared with 2019 levels.
It has secured new credit lines, tapped the bond market for billions of dollars and has said it will review its dividend distributions quarter by quarter. So far it has maintained its payout despite analysts saying it is unsustainable.
https://news.google.com/__i/rss/rd/articles/CBMiP2h0dHBzOi8vd3d3LmZ0LmNvbS9jb250ZW50LzU2NTc2OWViLTY2MTgtNGQ0My1hOThhLTU4ZThjM2RiMWQ3NtIBP2h0dHBzOi8vYW1wLmZ0LmNvbS9jb250ZW50LzU2NTc2OWViLTY2MTgtNGQ0My1hOThhLTU4ZThjM2RiMWQ3Ng?oc=5
2020-06-29 09:22:40Z
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