In a major strategic shift, British energy titan BP Plc has struck a deal to sell a controlling interest in its iconic Castrol lubricants business. The company announced an agreement to offload a 65 per cent stake to U.S. investment firm Stonepeak Partners for approximately US$6 billion.
A Pivotal Deal for a Company in Transition
This transaction represents a significant milestone for BP, which has endured a year of profound change and pressure from investors. The sale, finalized on December 24, 2025, will provide the oil and gas major with crucial capital to reduce its substantial debt, which stood at over US$26 billion at the end of the third quarter. All proceeds from the deal are earmarked for this purpose.
The agreement values the entire Castrol enterprise at US$10.1 billion, including debt. However, the implied total equity value adjusts to about US$8 billion after accounting for minority interests. While the final price fell short of some initial analyst projections that reached as high as US$10 billion, it delivers a substantial cash infusion for BP's balance sheet.
Strategic Reset Under New Leadership
The Castrol divestment caps a turbulent period for BP, heavily influenced by activist shareholder Elliott Investment Management. Earlier in February, the company overhauled its strategy, pulling back from ambitious renewable energy targets to refocus on its core oil and gas business. A central promise of this reset was a series of large asset sales to strengthen its finances.
The deal is a clear early mark from new Chairman Albert Manifold, who assumed his role in October. Manifold has moved swiftly, having already overseen a leadership change by replacing former CEO Murray Auchincloss with Meg O'Neill, the current chief of Woodside Energy Group Ltd., who is set to take the helm in April. Manifold has also engaged in private, constructive discussions with Elliott Investment Management.
BP will retain a 35 per cent interest in Castrol through a joint venture structure, maintaining some exposure to the division's future growth, which includes developing liquid cooling technology for AI data centres. The company has an option to sell this remaining stake after a two-year lock-up period. The transaction is expected to be completed by the end of 2026, pending regulatory approvals.
Financial Implications and Market Reaction
With the Castrol sale, BP's total proceeds from its asset-disposal program rise to roughly US$11 billion. This figure remains distant from the company's stated target of US$20 billion by the end of 2027, indicating that further significant sales will be necessary. Investors will be watching closely for progress from Chairman Manifold's ongoing portfolio review.
Market reaction was initially positive but muted. BP's shares rose as much as 1.4 per cent following the announcement before settling nearly unchanged in London trading. Analysts noted the trade-offs involved. RBC analyst Biraj Borkhataria pointed out that the accelerated dividends from the sale will aid debt reduction but come at the expense of medium-term cash flows from the profitable lubricants arm.
The sale of the Castrol majority stake is more than a simple financial transaction; it is a definitive step in BP's contentious journey to redefine itself, reduce leverage, and placate influential shareholders in an evolving energy landscape.
