The “break-up” of traditional energy giants: British Petroleum (BP.US) sells 65% of the century-old brand Castrol for $6 billion

The Zhitong Finance App learned that European traditional energy giant British Petroleum (BP.US) has agreed to sell most of its shares in its Castrol lubricants business division to Stonepeak Partners, a well-known American investment company. The sale is expected to raise about 6 billion US dollars. British Petroleum's Castrol (Castrol) lubricants business is the British Empire's century-old lubricant brand. It has an important position in automotive and industrial use scenarios, and also has an important position in the global energy industry value chain. The divestiture of most of the shares in Castrol (Castrol) by British Petroleum means that the energy giant has basically abandoned this century-old lubricant business in order to raise larger amounts of cash to reduce debt and reverse years of poor performance.

The UK-based oil giant will sell up to 65% of its shares, keep the remaining shares and hold them through a joint venture, the company said in a statement on Wednesday. This large-scale divestment transaction accounts for a significant portion of BP's $20 billion asset divestment plan. However, as a comparison, BP initially expected this sale to receive up to $10 billion in capital.

According to information, BP is selling assets in a big way to reduce debt and reverse the poor operating performance over the years, making the energy giant an aggressive shareholder — a key investment target for Elliott Investment Management, which has the title of “Wall Street Vulture”. The core purpose of Elliott's investment in British Petroleum is to push for drastic changes in British Petroleum to reduce debt, and force British Petroleum to completely stop aggressive plans to switch to renewable energy. It is hoped that the energy giant will once again reap the benefits in the traditional global energy industry Comparing the leading position between Chevron and ExxonMobil.

BP began the sale process of the Castrol (Castrol) lubricants business in February. At the time, then-CEO Murray Auchincloss announced a strategic restructuring plan, promising that BP would slow down its energy transition plans and refocus on oil and gas, while striving to drastically cut costs and reduce debt.

“This deal marks an important milestone in our accelerated strategic process, which includes streamlining our product portfolio, strengthening our balance sheet, and focusing on our leading integrated business areas,” the British energy giant said in a statement.

BP's Castrol Lubricants business mainly includes automotive and industrial lubricants, as well as developing liquid cooling technology for large artificial intelligence data centers.

According to the statement, Stonepeak's deal brought the business unit's valuation to $101 billion, including debt. The remaining shares retained by British Petroleum provided it with exposure to Castrol's “Accelerated Growth Plan” risk allocation for the next few years, and said that after a two-year lock-up period, the company has the right to sell this portion of the shares.

After British Petroleum previously announced a strategic restructuring in February, Elliott criticized the plan for not being thorough enough. Although then-CEO Auchincloss promised in the summer that the company “can achieve and will do better than expected,” the new chairman Albert Manifold decided to replace him soon thereafter, appointing Meg O'Neill, CEO of Woodside Energy Group Ltd., as CEO of Woodside Energy Group Ltd., as CEO of Woodside Energy Group Ltd., as CEO in April. The company's head of trading, Carol Howle, temporarily served as CEO.

This major transaction for Castrol is expected to be completed by the end of next year, subject to formal approval from regulators.

BP's current sale of most of the shares in Castrol's lubricants business is mainly for the purpose of “capital restructuring and strategic refocus”, striving to further ease debt pressure, optimize balance sheets, focus on core oil and gas businesses to enhance profitability and shareholder returns, and respond positively to the expectations of the market and aggressive investor Elliott Investment Management for continued optimization of asset allocation.

BP's move to sell the century-old Castrol lubricants business may prompt other companies in the traditional energy industry to make adjustments in asset portfolios and capital allocation to push the entire industry to further balance “cash flow priority versus long-term transformation.” Energy companies may be more inclined to streamline non-core assets, improve capital efficiency rather than blindly expand or fully advance the transformation sector.

For Castrol itself, after being taken over by capital parties such as Stonepeak, it is possible to obtain more focused capital investment in the field of lubricants and related technology to promote technological innovation (such as the application of Castrol liquid cooling technology in AI data centers) and market expansion.