Integrated oil giant BP plc's BP Brazilian subsidiary, BP Biofuels, recently agreed to form a joint venture (JV) with the country's ethanol merchant, Copersucar. The JV will own and operate the ethanol storage complex in Paulínia, Brazil. The ethanol storage terminal, presently owned by Copersucar, is the largest in the country.
The terminal is well connected with different shipping networks, which is expected to help the companies to reach the main ethanol consumer markets in the country.
The announcement of the JV followed the legislation passed by Brazil’s lower house of Congress, which proposes to increase biofuels usage in the country.
While BP Biofuels produces ethanol from sugarcane, Copersucar is a major sugar and ethanol trader. The deal will thus help the company to expand its value chain. The move is also one of the company's strategies to reduce its carbon footprint, as it believes that biofuels will gradually replace fossil fuels. It also believes that people looking for alternative fuels to fight climate change will opt for biofuels in the coming years. Hence, the deal is expected to help the company meet the growing demand for this type of fuel. It will also increase the company’s presence in the country.
The financial details of the deal are yet to be disclosed.
About the Company
London-based BP is among the leading integrated energy players in the world. Currently, the company reports mainly through four segments – Upstream, Downstream, Rosneft and Other Businesses and Corporate.
Recently, BP appraised its exploration portfolio. It reiterated its focus on growth of natural gas and advantaged oil in regions where it presently functions. The company is also seeking prospects to develop production regions while abandoning less-competitive exploration prospects. This is clearly reflected in the company’s sale of Bruce assets for £300 million. These initiatives will likely support the company with growing and sustainable free cash flow, which it can distribute among shareholders.
Price Performance
BP has gained 7.2% year to date compared with 4.4% growth of its industry.
Zacks Rank and Key Picks
BP sports a Zacks Rank #1 (Strong Buy).
Some other top-ranked stocks in the oil and energy sector include ConocoPhillips COP, Northern Oil and Gas, Inc. NOG and Denbury Resources Inc. DNR. All the stocks sport a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Houston, TX-based ConocoPhillips is a major global exploration and production company. The company’s sales for 2017 are expected to increase 24.4% year over year. The company delivered an average positive earnings surprise of 152.3% in the last four quarters.
Minnetonka, MN -based Northern Oil and Gas is an independent energy company. The company’s sales for the fourth quarter of 2017 are expected to increase 51.9% year over year. The company delivered an average positive earnings surprise of 175% in the last four quarters.
Plano, TX-based Denbury Resources is an oil and gas company. The company’s sales for the fourth quarter of 2017 are expected to increase 6% year over year. The company delivered an average positive earnings surprise of 125% in the last four quarters.
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