BP Snaps Up Majority Stake In Finite Carbon; Street Sees 36% Upside

BP PLC announced on Wednesday that it has bought a majority stake in US-based forest carbon offsets company Finite Carbon, as the oil giant has set out a goal to become a net zero company by 2050.

BP (BP) did not disclose any additional details on the financial terms of the deal. Finite Carbon was founded in 2009 and has since become the largest developer of forest carbon offsets in North America, with more than 40 forest projects covering nearly three million acres. The company offers landowners a one-stop solution for inventorying, managing, and monetising forest carbon assets.

The deal comes after BP last October invested $5 million in Finite Resources Inc, a parent company of Finite Carbon. The investment was intended to enable Finite Carbon to grow a new line of business to incentivize sustainable forest management, financed by businesses seeking to voluntarily offset carbon emissions.

Meanwhile, BP announced a plan in February to help its customers reduce their emissions by halving the carbon intensity of the products it sells, by 2050 or sooner – offering customers more and better choices of low- and no-carbon products.

“Finite Carbon has the potential to build a global platform for managing and financing natural climate solutions,” said David Eyton, BP’s executive vice president of innovation and engineering.

Finite Carbon expects to generate $1 billion for landowners over the next 10 years, after a 20-40% cut of the proceeds, its chief executive Sean Carney told Reuters earlier this month.

Shares in BP have lost 42% 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)

Raymond James analyst John Freeman this week raised the stock’s price target to $30 (37% upside potential) from $28 and reiterated a Buy rating, saying that he doesn’t “love the financial implications of the business pivot, but valuation is compelling.”

The rest of the Street has a cautiously optimistic outlook on the stock with a Moderate Buy analyst consensus. What’s more, the average price target of $29.80 implies upside potential of 36% over the coming 12 months.