BP has agreed to sell a 65 per cent stake in its Castrol lubricants business to US private equity firm Stonepeak for about $6 billion, as part of the oil major’s $20 billion divestment plan to cut debt and boost returns.
The deal, announced on Wednesday, values Castrol at $10.1 billion. It is BP’s largest asset sale so far as it moves to streamline operations and reduce its renewable energy investments after lagging rivals in share performance.
BP will retain a 35 per cent stake in a new joint venture with Stonepeak, which it can sell after a two-year lock-in period.
Shares in BP rose more than 1 per cent on Wednesday after the announcement before easing to trade slightly lower by 11:47 GMT.
While the deal values Castrol at about $10 billion, the enterprise value falls to roughly $8 billion after adjusting for minority interests and debt-like obligations, RBC analysts said in a note on Wednesday.
“We continue to question the rationale (beyond the headline multiple) of selling this highly cash-generative, low volatility and low capital intensity asset, as ultimately this is detrimental to the long term dividend sustainability and earnings quality of the business,” RBC analysts said in the note.
“Accelerated dividends now will help reduce debt, but clearly at the expense of medium-term cash flows.”
The sale, which includes $800 million for accelerated dividend payments, follows BP’s decision earlier this year to put the century-old lubricants unit under review as part of a broader strategy to focus on its core oil and gas business.
BP said it will use the proceeds to reduce debt and expects the deal to complete by the end of 2026.
The company has said it plans to sell $20 billion of assets to cut net debt from $26 billion to between $14 billion and $18 billion by the end of 2027. After the Castrol transaction, BP’s completed and announced divestment proceeds total around $11 billion.
In a separate statement, Stonepeak said the Canada Pension Plan Investment Board will invest up to $1.05 billion as part of the deal and gain an indirect stake in Castrol.
Stonepeak said it focuses on infrastructure investments, including energy businesses and real estate, and targets assets with long-term growth potential.
Private equity firms have about $2 trillion in capital raised and not yet committed, according to S&P Global.
Reuters reported in November that BP was in talks with Stonepeak about selling Castrol. The Wall Street Journal and the Financial Times first reported details of the deal late on Tuesday.
The Castrol sale process began earlier this year. In September, Stonepeak and private equity firm One Rock submitted bids for the unit, Reuters has reported, citing sources.
BP last week appointed Woodside Energy’s O’Neill as its next CEO, replacing Murray Auchincloss.
In October, BP chair Albert Manifold told employees the group’s portfolio was “overly complex” and that it needed to shift focus back to oil and gas faster.
In August, BP said it would review how best to develop and monetise its oil and gas production assets and consider further cost cuts to boost shareholder returns.
