Key Moments
- BP agreed to sell a 65% stake in its Castrol lubricants business to Stonepeak. The deal values Castrol at $10 billion and generates about $6 billion in net proceeds.
- Bank of America warned that BP’s share price could fall more than 10% and cut 2027+ EPS estimates by roughly 5% following the deal.
- The Castrol sale increases BP’s announced or completed divestments to $11 billion, just over halfway to its $20 billion disposal target.
BP’s Castrol Stake Sale and Use of Proceeds
BP announced a deal to sell a 65% interest in Castrol to Stonepeak. The enterprise value is $10 billion. This sale is part of BP’s strategy to accelerate asset disposals and reduce debt.
The transaction will bring approximately $6 billion in net proceeds. This includes around $0.8 billion from prepayment of future dividends on BP’s retained stake. BP plans to use all proceeds to lower net debt.
Bank of America Flags Share Price and Cash Flow Concerns
Bank of America analyst Christopher Kuplent said the sale could pressure BP’s stock. He expects over 10% downside from the current level.
“The 65% Castrol sale leaves BP exposed to risk, and it may dilute cash flow quality,” Kuplent wrote. The bank cut BP’s EPS forecasts for 2027 onward by about 5%. It also raised the breakeven oil price by roughly $3 per barrel.
Kuplent noted that BP’s $20 billion disposal program should yield over $4 billion by end-2025 and about $6 billion more by end-2026. Despite this, adjusted gearing may remain near 40%.
The analyst added that selling assets at roughly 10% free cash flow yields could raise breakeven oil prices by $10 per barrel, cut free cash flow by more than 5%, and reduce the quality of remaining cash flows.
RBC Highlights Dividend and Earnings Quality Risks
RBC Capital Markets analyst Biraj Borkhataria also raised concerns. He questioned the long-term effect of the Castrol sale on BP’s finances.
Borkhataria said, “Selling a highly cash-generative, low-volatility, low-capital-intensity asset may harm dividend sustainability and earnings quality.” He added, “Accelerated dividends now reduce debt, but they compromise medium-term cash flows.”
On capital allocation, he noted, “It may have been better to cut the buyback, which was funded from the balance sheet.”
Deal Structure, Joint Venture, and Disposal Progress
After completion, expected by end-2026 pending approvals, Castrol will operate as a joint venture between BP and Stonepeak. BP keeps a 35% stake but does not expect to recognize earnings or receive dividends in the near term. Stonepeak has preference on cash distributions.
Post-deal, BP’s total divestments rise to about $11 billion. This brings the company just over halfway toward its $20 billion disposal target.
Transaction Snapshot
| Item | Detail |
|---|---|
| Buyer | Stonepeak |
| Stake sold in Castrol | 65% |
| Enterprise value | $10 billion |
| Net proceeds to BP | Approximately $6 billion |
| Prepaid future dividend income included | Roughly $0.8 billion |
| BP’s remaining interest in Castrol | 35% |
| Expected completion | By end-2026, subject to approvals |
| Total divestments post-deal | About $11 billion |
| Disposal program target | $20 billion |
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