ii view: BP sells stake in Castrol motor oil business

Sale of 65% stake in Castrol Lubricants

Interim chief executive Carol Howle said: “Today’s announcement is a very good outcome for all stakeholders. We concluded a thorough strategic review of Castrol, that generated extensive interest and resulted in the sale of a majority interest to Stonepeak. 

“The transaction allows us to realise value for our shareholders, generating significant proceeds while continuing to benefit from Castrol’s strong growth momentum.”

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ii round-up:

BP (LSE:BP.) today announced the sale of a majority stake in its Castrol lubricants division to US investment firm Stonepeak for an approximate $6 billion (£4.4 billion). 

The oil major is selling a 65% stake in Castrol, retaining the remaining interest via a joint interest. Proceeds of the sale will be used to reduce BP’s net debt. The transaction comes just days after BP announced former Exxon Mobil Corp (NYSE:XOM) executive Meg O'Neill as its new head from early April. 

Shares for the FTSE 100 giant rose 0.5% in UK trading having come into this latest news up 8% so far in 2025. That’s similar to rival Shell (LSE:SHEL). The FTSE 100 index is up 19% year-to-date, while Brent crude is down 17%.

BP operates across three divisions with Castrol part of its customer and products business, which also includes retail forecourt operations and aviation fuelling.  

The Castrol part-sale comes under BP plans to review the business portfolio and drive simplification, with the sale contributing to a target to cut group net debt by $20 billion come the end of 2027. 

A retained 35% stake in Castrol leaves BP exposed to Castrol’s growth plan while retaining optionality to realise further value in the future. It follows the group’s earlier 2025 sale of US shale assets for $1.5 billion. 

This latest sale brings divestment proceeds to date to around $11 billion. BP continues to target net debt of $14-$18 billion by the end of 2027, with the figure standing at $26.1 billion as of late October. 

BP’s fourth-quarter results to late December are due to be announced on 10 February. 

ii view:

Began in 1908, BP today operates in more than 60 countries with most of its exploration and production coming from the US, North Africa, the Middle East and Latin America. Oil production and operations generate most profits at close to half, followed by gas and low carbon at around a third, and customer and products the balance of almost a fifth.  

For investors, a change in strategy and an emphasis on reducing net debt previously saw share buybacks halved to $750 million from $1.5 billion. Concerns regarding reduced energy demand given less cooperative global trade policy persist. BP’s return to focusing on fossil fuels is unlikely to please all investors given ongoing climate change concerns, while an estimated future price/earnings (PE) ratio above the three-year average may suggest that the shares are not obviously cheap. 

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More favourably, this latest sale brings existing strategic goals another step nearer. The recent announcement of a new chief executive could see the oil major’s strategic goals further reinvigorated. More than 10 exploration discovery successes year-to-date underline an emphasis on operational improvement, while shareholder returns remain important given a near-term focus on the dividend and a policy to increase payment by at least 4% a year.

On balance, and while BP continues to reshape the business in a drive to lower debt and improve efficiency, a forecast dividend yield of over 5% is likely to keep income-oriented investors at least firmly supportive.  

Positives: 

• Diversity of operations
• Pursuing cost savings 

Negatives:

• Climate change concerns  
• Uncertain economic outlook

The average rating of stock market analysts:

Strong hold