BP to sell 65% stake in Castrol to Stonepeak for $6 billion

By Stephanie Kelly

Dec 24 (Reuters) - BP has agreed to sell a 65% stake in its Castrol lubricants business to U.S. investment firm Stonepeak for about $6 billion, a significant step in the oil major’s $20 billion divestment plan aimed at cutting debt and boosting returns.

The deal, announced on Wednesday, values Castrol at $10.1 billion, and is the British major's most ambitious and successful asset sale so far in its efforts to streamline operations and scale back its renewable energy investments after years of lagging share performance against its rivals.

BP will keep a 35% stake in a new joint venture with Stonepeak, which it can sell after a two-year lock-in period.

Shares in BP gained over 1% on Wednesday after the announcement and were up 0.4% as of 0829 GMT.

The sale, which includes $800 million for accelerated dividend payments, comes after BP put the century-old lubricants unit under review earlier this year as part of a broader strategy to focus on its core oil and gas business. The oil major will use the sale proceeds to reduce debt, it said. 

The company has vowed to sell $20 billion worth of assets to help slash its net debt from $26 billion to between $14 billion and $18 billion by the end of 2027.

After the Castrol deal, BP's completed and announced divestment proceeds so far total around $11 billion.

In a separate statement, Stonepeak said Canada Pension Plan Investment Board will invest up to $1.05 billion as part of the deal and gain an indirect stake in Castrol.

Reuters reported in November that BP was in talks with Stonepeak over selling Castrol. The Wall Street Journal and the Financial Times first reported details of the deal late on Tuesday.

Castrol's sale process began earlier this year. In September, Stonepeak and private equity firm One Rock submitted bids for the unit, Reuters previously reported, citing sources.

BP last week appointed Woodside Energy's Meg O'Neill as its next CEO, taking over from Murray Auchincloss, as it strives to improve its profitability and share performance.

In October, new BP Chair Albert Manifold told employees that the group's portfolio was "overly complex" and it needed to execute its strategy of shifting focus back to oil and gas faster. In August, BP said it would launch a review of how best to develop and monetise its oil and gas production assets and consider more cost cuts to boost shareholder returns.

(Reporting by Rishabh Jaiswal, Yamini Kalia and Shashwat Awasthi in Bengaluru, and Stephanie Kelly in Chicago; Editing by Rashmi Aich and Tomasz Janowski)