BP Shares Gain Following Gelsenkirchen Refinery Sale Announcement

BP (LON: BP.) shares are trading higher today following the announcement of an agreement to sell its Gelsenkirchen refinery in Germany to Klesch Group.

This move accelerates BP’s strategic shift towards a simplified portfolio, focusing on its core integrated businesses. The markets are reacting positively to the increased efficiency and strengthened balance sheet that the sale promises.

The deal is projected to boost BP’s structural cost reduction target by approximately $1 billion, bringing the total target to $6.5 to $7.5 billion by 2027. The original target of $4-$5 billion set in February 2025, was previously increased to $5.5-$6.5 billion in February 2026 after a strategic review of Castrol. This new target represents about 30% of BP’s 2023 cost baseline.

Beyond cost savings, the sale is designed to improve BP’s financial standing. The transaction is expected to be free cash flow accretive based on historical performance and will lower the cash breakeven point for BP’s remaining refining assets. Transfer of liabilities associated with the refinery is also part of the agreement.

Carol Howle, interim CEO at BP, stated, “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.”

The Gelsenkirchen refinery processes around 12 million tonnes of crude oil annually, producing fuels for vehicles and aircraft, and also supplies feedstocks to the petrochemical industry. The sale includes the refinery, the Bottrop tank farm, DHC Solvent Chemie GmbH, logistics joint venture interests, and related marketing businesses. BP has secured offtake agreements to maintain its regional supply of ground fuels, aviation fuel, and coke.

The Gelsenkirchen refinery employs around 1,800 people, who are expected to transition to Klesch Group upon the deal’s completion. Regulatory and governmental approvals are still required, with the transaction anticipated to close in the second half of 2026.

The sale removes liabilities, including pension obligations and other short-term liabilities. Starting with BP’s Q1 2026 results, assets and liabilities related to the Gelsenkirchen refinery (excluding working capital) will be reclassified as Assets Held for Sale.