(Bloomberg) — BP Plc agreed to sell a majority stake in its Castrol lubricants division to US investment firm Stonepeak Partners, marking a key milestone as the oil and gas major seeks to reduce debt and reset its business.
The UK energy giant will raise about $6 billion from the sale of a 65% interest, which includes some prepayment of future dividends on its remaining stake. While the price falls short of earlier expectations, it’s a notable move by new Chairman Albert Manifold, who’s already made his mark by replacing the CEO.
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The sale caps a turbulent year for BP. Under pressure from activist shareholder Elliott Investment Management, the company overhauled its strategy in February to pull back from renewables and refocus on its core business. It also promised big asset sales to reduce debt, but progress has been uneven, and the pivot back to fossil fuels is hampered by an oil price well below the assumptions in BP’s financial modeling.
The shares rose as much as 1.4% early Wednesday, before erasing gains to trade down 0.4% at 12:45 p.m. in London.
The Castrol deal brings proceeds from BP’s asset-sale program to about $11 billion, it said in a statement. That’s far off the $20 billion targeted by the end of 2027, and investors will be looking for further progress from Manifold, who has been overseeing a fresh portfolio review since arriving in October.
BP kicked off the Castrol sale process back in February, and analysts initially expected the business to fetch as much as $10 billion. The divestment program was a key piece of then-Chief Executive Officer Murray Auchincloss’s corporate reset, which received a lukewarm reception from Elliott.
Manifold has since engaged privately with the activist investor and held constructive discussions, Bloomberg reported last week. He also replaced Auchincloss with Woodside Energy Group Ltd. chief Meg O’Neill, who will take the helm in April.
Cutting Debt
The Castrol business includes lubricants for autos and industries, and has also been developing liquid cooling technology for artificial intelligence data centers. All proceeds from the disposal will go toward reducing debt, according to BP, whose net debt stood at more than $26 billion at the end of the third quarter.
Under the terms of the deal, BP will retain a 35% interest in Castrol via a joint venture, it said. The agreement values Castrol at $10.1 billion including debt, but its implied total equity value falls to $8 billion after deducting minority interests.
