Background on BP and Castrol
BP, one of the world’s leading oil and gas companies, has agreed to sell a 65% stake in its Castrol lubricants business to U.S.-based investment firm Stonepeak for approximately $6 billion. This transaction is a significant step in BP’s $20 billion divestment plan, aimed at reducing debt and enhancing profitability.
Valuation and Impact
The deal values Castrol at $10.1 billion and represents BP’s most ambitious asset sale to date as part of its efforts to streamline operations and decrease investments in renewable energy following years of underperformance compared to competitors.
BP will retain a 35% stake in a new joint venture with Stonepeak, which can be sold after a two-year lockup period.
BP’s Financial Strategy
Following the announcement, BP’s stock gained over 1%, rising by 0.4% at 08:29 GMT. The sale, which includes $800 million for accelerated dividend payments, comes after BP put its century-old lubricants division under review earlier this year as part of a broader strategy to focus on its core oil and gas business.
BP intends to use the proceeds from this sale to lower its debt. The company has committed to selling assets worth $20 billion to reduce its net debt of $26 billion to between $14 billion and $18 billion by the end of 2027.
With this Castrol transaction, BP’s completed and announced divestments amount to approximately $11 billion.
Additional Investors
In a separate statement, Stonepeak mentioned that Canada Pension Plan Investment Board will invest up to $1.05 billion as part of the operation and acquire an indirect stake in Castrol.
Negotiations and Recent Developments
Reuters reported in November that BP was in talks with Stonepeak to sell Castrol. The Wall Street Journal and Financial Times first reported on the deal’s details late Tuesday.
The Castrol sale process began earlier this year. In September, Stonepeak and private equity firm One Rock submitted bids for the unit, according to Reuters sources.
Last week, BP appointed Meg O’Neill from Woodside Energy as its next CEO, succeeding Murray Auchincloss, in an effort to improve profitability and share performance.
BP’s Strategic Focus
In October, BP’s new CEO-elect Albert Manifold told employees that the group’s portfolio was “excessively complex” and required faster execution of its strategy to refocus on oil and gas.
In August, BP announced it would review the best ways to develop and monetize its oil and gas production assets, along with cost-cutting measures to boost returns for shareholders.
Key Questions and Answers
- Who is BP? BP is a multinational oil and gas company headquartered in London, United Kingdom.
- What is Castrol? Castrol is a leading global brand in the lubricants industry, owned by BP. It produces and distributes engine oils, greases, and other lubricants for various applications.
- Why is BP selling a stake in Castrol? BP aims to reduce debt, enhance profitability, and streamline its operations by focusing on its core oil and gas business.
- Who is Stonepeak? Stonepeak is a U.S.-based investment firm that focuses on infrastructure, real estate, and energy transition opportunities.
- What is the significance of this deal for BP? This transaction represents BP’s most ambitious asset sale to date and is part of its $20 billion divestment plan.
- What will BP do with the proceeds from this sale? BP intends to use the funds to lower its debt and continue executing its strategy of focusing on oil and gas.
