BP to Create JV to Build Acetic Acid Plant in Eastern China

Zacks Equity Research

BP plc BP recently signed a memorandum of understanding with Zhejiang Petroleum and Chemical Corporation of China to build an acetic acid plant. The companies are expected to create an equally-owned joint venture (JV) for the facility that will have a capacity of 1 million tons per year.

The acetic acid plant is expected to be built in Zhoushan, Zhejiang Province of eastern China, wherein Zhejiang Petroleum has a refining and petrochemical manufacturing complex. The plant is expected to utilize BP’s CATIVA® XL technology, which will be used to produce acetic acid — a chemical applied in products like paints, adhesives, solvents, purified terephthalic acid and others. Notably, the CATIVA® XL technology provides higher efficiency and lower carbon footprint at low capital investment.

The plant is designed to be BP’s biggest acetic acid facility and will likely enable it to earn huge profits from China’s growing massive acetic acid market, which is the biggest in the world. Markedly, this move is expected to boost BP’s presence in Asia, where demand for refining products is on the rise. In addition to two existing acetic acid joint ventures, the British energy giant has several petrochemical manufacturing facilities in China.

Notably, the company is also planning to increase its refining footprint in the continent via building a fuel retailing joint venture with India-based Reliance Industries. The company’s new ventures in the refining market of Asia are commendable, as these will significantly boost the downstream segment’s earnings. The unit contributed $1,365 million to profits during the June quarter of 2019, accounting for 25% of its total earnings.

Price Performance

BP has lost 1.1% year to date compared with 3.2% fall of the industry it belongs to.

Zacks Rank and Stocks to Consider

Currently, BPcarries a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are Matrix Service Company MTRX, Exterran Corporation EXTN and Pembina Pipeline Corp. PBA. While Matrix Service sports a Zacks Rank #1 (Strong Buy), Exterran and Pembina hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Matrix Service’s 2019 earnings per share are expected to rise 58.4% year over year.

Exterran’s 2019 top line is expected to rise around 5% year over year.

Pembina’s 2019 earnings per share are expected to rise 21.5% year over year.

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