BP (BP.US) sells Castrol shares for $6 billions to repay debt, Stonepeak acquires 65%

Jit Tong Finance APP has learned that BP (BP.US) completed the sale of a 65% stake in its Castrol lubricants business to US private equity firm Stonepeak Partners on Monday. Following the transaction, BP received $6 billion in after-tax proceeds, which will be used to reduce debt and strengthen its financial position. BP retains a 35% stake in Castrol and has formed a new joint venture with Stonepeak.

Reportedly, BP agreed to sell the 65% stake at the end of last year, marking a key milestone in the company’s efforts to reset its business after years of underperformance. BP is using excess cash to reduce its financial obligations, including conventional debt, hybrid bonds, leases, and settlement payments related to the Deepwater Horizon incident. The company is also advancing a series of asset disposals to streamline its business and concentrate investments on its core upstream, downstream, and trading operations.

BP announced last week, when reporting strong profits, that its net debt had dropped to approximately $13.87 billion by the end of the third quarter, thus achieving its net debt target a year ahead of schedule.

BP CEO Meg O’Neill stated in a Monday announcement: “This transaction brings substantial cash proceeds to BP today while retaining a valuable stake in Castrol’s future growth. Castrol now has greater autonomy to accelerate its next phase of development.”

O’Neill became BP’s first externally appointed CEO this April and is preparing to unveil the company’s long-term strategy in December.

Stonepeak stated that, following completion of the transaction, Castrol has appointed a new board of directors, chaired by former Shell (SHEL.US) CEO and current Clariant AG chairman Ben van Beurden. The new board will include four independent directors (including the chair), three directors affiliated with Stonepeak, two BP directors, and one director from CPP Investments; CPP Investments is also participating as an indirect minority equity investor.