ii view: BP advances strategy with refinery sale

Agreement to sell Gelsenkirchen refinery

Interim chief executive Carol Howle said:

"With this transaction, we are strengthening our balance sheet, increasing our structural cost reduction target, and increasing the resilience of our focused refining portfolio. 

“We will continue to take decisive action to reduce portfolio complexity - with a continued focus on growing cash flow and returns and delivering value for our shareholders."

• Invest with ii: Open an ISA | ISA Investment Ideas | ISA Offers & Cashback

ii round-up:

Ahead of new chief executive Meg O'Neill joining in April, BP (LSE:BP.) today announced the sale of its European Gelsenkirchen refinery and related operations for an undisclosed sum. 

The deal advances the oil major’s strategy to simplify its portfolio, focus on core integrated businesses and reduce net debt. 

Shares in the FTSE 100 giant rose by 2% in UK trading having come into this latest news up by just over a quarter so far in 2026. That’s similar to rivals Shell (LSE:SHEL) and Chevron Corp (NYSE:CVX) and follows a soaring oil price since war in the Middle East broke out at the end of February. The FTSE 100 index is up by less than 1%.

BP expects the deal to increase its structural cost reduction target by approximately $1 billion to a range of $6.5-7.5 billion by 2027 – savings of close to a third compared to its 2023 cost baseline. 

Gelsenkirchen processes approximately 12 million tonnes of crude oil per year, producing petrol, diesel, jet fuel, heating oil and other products for the chemical industry.

Expected cost savings of around $1 billion from the sale of Gelsenkirchen leave BP targeting a reduction in refining cash breakeven of around $3 per barrel by 2027 versus 2024 on a like-for-like portfolio basis.

Today’s news follows previous BP announcements relating to the sale of the group’s Castrol engine oil business as well a maximum $5 billion write-down of prior investments made in green renewable assets. 

First-quarter results are scheduled for 28 April. 

ii view:

Starting operations in 1901, BP operates in more than 60 countries. Oil production and operations generated most profits at close to half during the group’s last financial year. That was followed by gas and low carbon energy at around a third, with customer and products or the downstream forecourt retailing business the balance of almost a fifth.   

For investors, sales of assets such as the Castrol lubricant business have reduced diversity of assets and profit generating centres. A war in the Middle East could impact operations and production as seen at rival Shell. A refocus back toward higher profit-making fossil fuels and away from renewables likely does not please all investors, while changes in strategy and a push to reduce net debt previously saw the share buyback programme suspended. 

• Insider: these directors lock in 7% yield at a discount
• Mining Insights 2026: analysis and trends
• Sign up to our free newsletter for investment ideas, latest news and award-winning analysis

On the upside, a focus on higher profit-making businesses is now being made, with the new CEO potentially further reinvigorating strategy. More than ten exploration discovery successes during 2025 look to underline an emphasis on operational improvement. A push towards a simpler business and resultant business disposals continue to see group net debt falling, while shareholder returns remain important given the ongoing payment of a dividend.

For now, and while the volatility of energy prices should not be forgotten, conflict in the Middle East and a forecast dividend yield of over 4% will likely attract investors to this oil major.

Positives: 

• Focus on increased efficiency
• Attractive dividend yield (not guaranteed)

Negatives:

• Climate change concerns persist
• Uncertain economic outlook

The average rating of stock market analysts:

Strong hold