BP Close to Selling Majority Stake in Castrol to Stonepeak: WSJ

• Sale proceeds will reduce BP's net debt from $26 billion to between $14-18 billion by 2027, with $800 million marked for accelerated dividend payments
• Canada Pension Plan Investment Board will invest up to $1.05 billion in the deal, gaining an indirect stake in Castrol
• Analysts question selling this 'highly cash generative, low volatility' asset, warning it could hurt BP's long-term dividend sustainability

BP Sells Majority Stake in Castrol to Stonepeak for $6 Billion

BP has agreed to sell a 65% stake in its Castrol lubricants business to U.S. private equity firm Stonepeak, valuing the unit at $10.1 billion. The transaction represents BP's largest divestment to date under its $20 billion asset sale program aimed at reducing debt and focusing on core oil and gas operations.

Key Deal Terms:

• BP retains 35% stake in new joint venture, with ability to sell after 2-year lock-in period
• Sale includes $800 million in accelerated dividend payments
• Enterprise value approximately $8 billion after adjusting for minority interests and debt
• Expected completion by end of 2026

Financial Impact:

• Proceeds will reduce BP's net debt from current $26 billion toward target of $14-18 billion by 2027
• Deal brings BP's total divestment proceeds to approximately $11 billion
• Canada Pension Plan Investment Board will invest up to $1.05 billion for indirect Castrol stake

Market Analysis:

RBC analysts questioned the strategic rationale, noting Castrol is a "highly cash generative, low volatility and low capital intensity asset." They warned the sale prioritizes short-term debt reduction over long-term dividend sustainability and earnings quality.

The divestment aligns with BP's strategic pivot under incoming CEO Murray Auchincloss and new Chairman Albert Manifold, who stated the company's portfolio is "overly complex" and needs faster refocusing on oil and gas. The sale follows BP's broader retreat from renewable energy investments after years of underperformance versus rivals.

Stonepeak, an infrastructure-focused private equity firm, continues the trend of PE buyers targeting conglomerate divestments, with approximately $2 trillion in uncommitted capital seeking deployment opportunities.