BP Joins Up With Equinor For $1.1B Offshore Wind Partnership

BP PLC and Equinor today announced a strategic partnership to develop offshore wind projects in the US. As part of the deal, the UK oil and gas giant will buy a 50% interest in two of Equinor’s US wind assets – the Empire Wind and Beacon – for $1.1 billion.

BP (BP) said that the collaboration includes the development of existing offshore wind leases on the US East coast as well as the joint pursuance of further opportunities for offshore wind projects in the US. The deal is expected to close in early 2021, subject to customary regulatory and other approvals.

“This is an important early step in the delivery of our new strategy and our pivot to truly becoming an integrated energy company. Offshore wind is growing at around 20% a year globally and is recognized as being a core part of meeting the world’s need to limit emissions,” said BP CEO Bernard Looney. “Equinor is a recognized sector leader and this partnership builds on a long history between our two companies. It will play a vital role in allowing us to deliver our aim of rapidly scaling up our renewable energy capacity, and in doing so help deliver the energy the world wants and needs.”

The partnership comes just a month after BP announced its target to increase annual low carbon investment 10-fold to around $5 billion a year and grow its developed renewable generating capacity from 2.5 gigawatts (GW) in 2019 to around 50GW by 2030.

First power generation from Empire Wind’s phase 1 is expected in the mid-2020s and phase 2 is preparing for upcoming solicitations, BP said. Beacon Wind will also be developed for future solicitation opportunities and will begin a review process to secure all necessary permits for the project, the company added.

Shares in BP have lost 46% of their value this year as the coronavirus pandemic pushed oil prices to multi-year lows leading to declines in oil and gas output. (See BP stock analysis on TipRanks)

Meanwhile, Piper Sandler analyst Ryan Todd last month upgraded the stock to Buy from Hold with a price target of $31, up from $28, citing cost reductions that are bringing down breakevens across the group. Furthermore, Todd views valuations at the European majors as more attractive relative to their US counterparts.

The analyst noted that multiples, breakevens, and free cash flow yields are at “historically large discounts,” while improving visibility on the medium- and long-term strategy should at least partially alleviate concerns on near-term risks.

The rest of the Street shares Todd’s bullish outlook with a Strong Buy analyst consensus. What’s more the $28.63 average price target implies a potential 41% gain in the shares over the coming 12 months.