BP Looking at Divesting Downstream Assets to Shore Up Its Finances

In a strategic move amid ongoing pressures to streamline operations and bolster financial health, BP is reportedly in advanced negotiations to sell its iconic Castrol lubricants business to U.S. investment firm Stonepeak. This potential divestment aligns with BP’s broader efforts to shed non-core assets, focus on high-margin oil and gas activities, and meet ambitious divestment targets.

As the energy giant navigates investor scrutiny and a shifting market landscape, this deal could provide a significant cash infusion to strengthen its balance sheet.

“When brands like Castrol are sold, it’s rarely just about capital, it’s about strategic focus. Divestments like this free up resources for the next growth horizon, whether that’s LNG, new energy, or upstream efficiency.” – Modupe Ladipo on LinkedIn

Details of the Potential Castrol Sale

Castrol, a century-old brand renowned for its automotive and industrial lubricants, has been a key part of BP’s downstream portfolio. The unit generates substantial revenue through global sales of engine oils, greases, and specialty fluids, serving markets from consumer vehicles to heavy industry. Earlier this year, BP placed Castrol under strategic review as part of a portfolio optimization push led by its new Chair, Albert Manifold.

According to recent reports, BP is actively discussing the sale with Stonepeak, a New York-based infrastructure and real assets investor managing around $80 billion in assets. In September, both Stonepeak and private equity firm One Rock submitted bids for the business.

While details of the offers remain undisclosed, analysts at RBC have estimated the deal could fetch approximately $8 billion, with some sources suggesting a range up to $8-10 billion.

However, no agreement is guaranteed, and it’s unclear if talks with other parties are ongoing.

This isn’t BP’s first attempt to divest downstream assets. The company has been under pressure from activist investors, including hedge fund Elliott, to accelerate cost-cutting and refocus on core upstream activities. The sale of Castrol would fit into BP’s $20 billion divestment program, with around $5 billion in asset sales anticipated this year alone.

Impact on BP’s Balance Sheet

BP’s latest financials, released for the third quarter of 2025, show an underlying replacement cost profit of $2.2 billion, operating cash flow of $7.8 billion, and net debt standing at $26.1 billion.

This debt level exceeds the company’s target range of $14-18 billion, highlighting the need for deleveraging to maintain an ‘A’ grade credit rating and weather commodity price volatility.

A successful sale of Castrol could inject $8-10 billion in proceeds, directly reducing net debt by a substantial margin—potentially bringing it closer to the $14-18 billion target. This would enhance liquidity, lower interest expenses, and provide flexibility for shareholder returns or investments in renewable energy transitions. Analysts suggest the move would streamline BP’s operations, reducing exposure to the more volatile downstream segment while freeing up capital for higher-return projects in oil and gas exploration.

However, divesting a profitable unit like Castrol might slightly impact recurring earnings, though the overall balance sheet fortification is expected to outweigh this.