BP p.l.c. (NYSE:BP) shares are trading higher after the company agreed to purchase Bunge Global SA's (NYSE:BG) 50% stake in their joint venture, BP Bunge Bioenergia S.A., for an enterprise value of about $1.4 billion.
The acquisition will consolidate 100% of the venture's financial results, including net debt of about $0.5 billion and lease obligations of around $0.7 billion.
The buyout meets BP's expected bioenergy returns threshold of over 15% and fits within its disciplined financial framework, which includes capital expenditure targets of around $16 billion for 2024 and 2025.
Upon completion, BP can produce about 50,000 barrels per day of ethanol equivalent from sugarcane through Bunge Bioenergia's 11 agro-industrial units in five Brazilian states.
After the deal closes, BP will become the sole owner of the industrial-scale sugarcane and ethanol business.
This acquisition and focus on key biofuels projects are expected to support BP's strategic growth in bioenergy, aiming for around $2 billion in EBITDA from bioenergy and $3 billion-$4 billion across all transition growth engines by 2025.
Bunge expects this second and final monetization event of its ownership in the business to yield net proceeds close to $800 million.
Emma Delaney, BP's executive vice president, customers and products said, "Focusing our plans to develop new biofuels projects is also driven by value. Taken together, these changes can enable us to deliver the growth and returns we expect from biofuels, but in a simpler, more focused way. This is fully in line with bp's priorities of driving focus into the business and growing shareholder returns."
By 2025, BP aims to increase its biofuels production to approximately 50 million barrels per day (mbd) and its biogas supply to about 40 thousand barrels of oil equivalent per day (mboed).
By 2030, the company targets to expand its biofuels production to around 100 mbd and its biogas supply to about 70 mboed.
As of first-quarter FY24-end, the company's net debt stood at $24.02 billion.
Investors can gain exposure to the stock via Direxion Hydrogen ETF (ARCA: HJEN) and First Trust Exchange-Traded Fund IV FT Energy Income Partners Strategy ETF (ARCA: EIPX).
Also Read: BP Tightens Workplace Relationship Rules After CEO Firing: Report
Price Action: BP shares are up 0.79% at $35.67 at the last check Thursday.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.