New Delhi: BP on Wednesday said it has reached an agreement to sell a 65 percent shareholding in its lubricants business Castrol to infrastructure investor Stonepeak at an enterprise value of USD 10 billion, as it continues to reshape its portfolio and cut debt. Following a strategic review of Castrol, BP said the transaction will result in total net proceeds of about USD 6 billion, including around USD 800 million from accelerated dividend payments linked to BP’s retained 35 percent stake. The proceeds will be fully used to reduce net debt.
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After completion, a new joint venture will be formed with Stonepeak holding 65 percent and BP retaining 35 percent. BP said its remaining stake will allow it to maintain exposure to Castrol’s growth plans, with the option to monetise the holding after a two-year lock-up period.
The implied total equity value of Castrol stands at USD 8.0 billion after accounting for joint venture minority interests of USD 1.8 billion and other debt-like obligations of around USD 0.3 billion, BP said. A significant portion of the minority interests relates to the publicly listed Castrol India Limited.
While the deal values Castrol at about USD 10 billion, the enterprise value falls to roughly USD 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."
BP said the Castrol transaction follows its decision earlier this year to place the century-old lubricants business under strategic review, as the company sharpens its focus on its core oil and gas operations and downstream priorities.
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The company has outlined plans to divest assets worth USD 20 billion to bring down net debt from USD 26.1 billion to a range of USD 14 billion–18 billion by the end of 2027. With the Castrol transaction, BP’s completed and announced divestments now total around USD 11 billion.
The transaction is expected to close by the end of 2026, subject to regulatory approvals.
