BP's Bold Move: Selling Stake in Castrol to Cut Debt

BP has sold a 65% stake in its Castrol lubricants business to Stonepeak for $6 billion as part of its $20 billion divestment strategy. While this sale accelerates debt reduction, analysts question its impact on long-term dividends and cash flow sustainability for the oil major.

In a strategic move, BP has agreed to sell a 65% stake in its Castrol lubricants business to American investment firm Stonepeak for around $6 billion. This transaction is a key component of BP's ambitious $20 billion divestment strategy, aiming to slash debt and improve shareholder returns.

BP will maintain a 35% stake in a new joint venture, retaining the option to sell it after a two-year period. Despite the announcement leading to a temporary rise in BP's shares, concerns linger about the long-term impact on dividend stability and earnings quality.

The sale, which includes $800 million for accelerated dividends, marks a significant step in BP's plan to concentrate on its core oil and gas ventures. With $11 billion already secured from asset sales, BP is well on its way to reducing its net debt from $26 billion to a target range of $14-18 billion by 2027.

(With inputs from agencies.)