$100 Oil Price Spurs 'Cash Flow Revaluation' Logic! BP Plans to Sell Brazilian Biofuel Business to Accelerate Focus on Oil and Gas Assets

According to Zhitong Finance APP, BP (BP.US), one of Europe’s traditional energy giants, is considering various options for its Brazilian biofuels business, including a possible sale. Meanwhile, CEO Meg O’Neill is accelerating efforts to reshape the energy giant’s business portfolio and concentrate capital on its core operations. This move underscores how BP’s management is further focusing capital on its core oil and gas business and debt reduction at a time when international oil prices remain high.

This business only achieved full control in 2024 through the acquisition of the remaining 50% stake, and now may return to the sales list, reflecting CEO Meg O'Neill's reprioritization of capital allocation. Potential transactions involving Castrol, refinery, and renewable energy asset adjustments all point to one goal: improving cash recovery capacity, repairing the balance sheet, and boosting shareholder returns. However, the sale of the Brazilian business remains at an early discussion stage, with no final decision made yet.

As of the Asian early trading session on September 29 Beijing time, the nearby contract of Brent crude oil futures, the international oil price benchmark, was quoted at $105.91 per barrel, up about 46.1% from $72.48 on February 27, the last trading day before the US and Israel launched military operations against Iran. Using settlement prices, Brent closed at $105.28 on September 28, up about 45.3% from before the conflict, and up about 17.9% compared to $89.31 on August 28.

The most direct catalyst for the latest upsurge in oil prices was undoubtedly Trump’s rejection of Iran’s strait reopening proposal, which once again dashed hopes for supply recovery. Qatar subsequently drove separate talks with Iran’s Foreign Minister Araqchi and the US side, discussing revised versions of the previous seven-day proposal, causing oil prices to partially retreat from their gains. What the market is really trading on is whether energy transport can return to normal: even if export volumes recover somewhat, strait restrictions and alternatives such as ship-to-ship transfers still increase shipping costs and delivery uncertainty, so international oil prices are being pulled by both supply constraints and diplomatic progress.

From Full Acquisition to Considered Sale: BP’s Brazilian Business Reflects Strategic Shift

According to people familiar with the matter, BP is considering various options for its Brazilian biofuels business, including a possible sale. Meanwhile, CEO Meg O’Neill is accelerating efforts to reshape the energy giant’s business portfolio and concentrate capital on its core operations.

BP previously acquired a 50% stake in the business in 2024 for $1.4 billion (including debt), thus securing control. Sources said the company no longer regards this business as core to its future strategy. The discussions around selling the business are still at an early stage, and no final decision has been made as of now.

A BP spokesperson declined to comment.

If a deal is reached, it would mark another step in BP’s broader efforts to streamline its portfolio, raise funds for core oil and gas businesses, and repay debt. The company has committed to divesting around $20 billion of assets by 2027, aiming to cut debt, lower costs, and improve returns. Previously, former CEO Murray Auchincloss announced a strategic shift last year, moving away from the more aggressive energy transition investment style of his predecessor, Bernard Looney.

This potential divestment would also signal a significant turn for BP’s Brazilian bioenergy business. In 2024, BP management agreed to pay $1.4 billion to acquire Bunge Global’s remaining 50% stake in their Brazilian sugar and ethanol joint venture, achieving full ownership. At the time, BP described this platform as a scalable, cost-competitive bioenergy business with plans to explore further opportunities in ethanol, sustainable aviation fuel, and biogas.

As BP reevaluates investments outside traditional oil and gas, this strategy has since come under pressure. The company has cut back new low-carbon projects and other related investments, while continuing to divest various assets.

In December last year, BP agreed to sell a 65% stake in its lubricants business Castrol to Stonepeak, retaining a 35% stake. This summer, the company completed the sale of the Gelsenkirchen refinery in Germany to the Klesch Group. As part of its overall asset divestment plan, it has also been seeking to sell its Lightsource solar and battery business. In 2024, BP similarly acquired the remaining stakes in Lightsource but soon after sought to sell the business. This year, Petrobras acquired 49.99% of Lightsource’s Brazilian subsidiary.

Selling the Brazilian biofuels business would provide BP with another potentially sizable source of funds while enabling the company to redirect capital to debt repayment, its oil and gas business, and other segments seen as offering higher returns.

From Oil Price Windfall to Shareholder Returns: BP’s Hotly Watched “Cash Flow Recapture Battle”

Morgan Stanley’s recent bullish thesis for BP’s core logic is the co-improvement of cash flow, debt reduction, and upstream growth prospects. In early September, the bank maintained its ‘Overweight’ rating and raised the target price for London-listed ordinary shares from 519 pence to 598 pence.

According to a research note published on September 8, Morgan Stanley projects BP will generate about $17 billion in free cash flow by 2027, corresponding to a free cash flow yield of around 15%, higher than the industry average of approximately 11%. This measures free cash flow as a percentage of market cap, not dividend yield. The bank also sees positives in net debt reduction, the potential relaunch of buybacks, and the catalytic effect of the Brazilian Bumerangue oil field appraisal work.

Another Wall Street behemoth, JPMorgan, noted that in terms of cash flows, when production and costs are manageable, high oil prices can expand operating cash surpluses for oil and gas producers, supporting debt repayment, dividends, and buybacks. This is why JPMorgan, Goldman Sachs, Morgan Stanley, and other Wall Street giants have recently issued frequent bullish reports on energy giants. JPMorgan’s key logic for being bullish on BP is that these cash flows, combined with internal restructuring, are expected to drive financial repair and improved shareholder returns.

With a baseline assumption of Brent crude at $75 per barrel in 2027, JPMorgan still expects BP’s total financial obligations to fall by 50% by the end of 2027 and believes the value created by the restructuring translates to a high single-digit annual growth rate in underlying earnings per share over three years, so it raised its target price by approximately 22.7% to 675 pence. This logic points toward lower debt burdens, improved financial expenses, and greater value returned to shareholders.

Wall Street’s overall bullish investment thesis for BP can be summarized as a “cash flow recapture battle”: high oil prices enhance the revenue-generating capacity of upstream assets with normal production and delivery capabilities, while monetizing non-core assets is expected to accelerate debt reduction, lower future interest burdens, and free up room for core business investments and shareholder distributions. Not long ago, BP made it clear that around $20 billion in asset sales would be announced by the end of 2027; this target does not mean that all proceeds will be completed by then. What really determines whether the revaluation can be realized are the sale price, the actual scale of debt reduction, and the sustained revenue-generating capacity of the remaining assets after the divestitures.