BP's $8 Billion Castrol Sale Draws Bid From Firm Tied to Chairman

BP plc’s BP planned sale of its Castrol lubricants business, valued at around $8 billion, is drawing interest from a range of high-profile bidders, including private equity giant Clayton Dubilier & Rice (CD&R), according to a report from Sky News. The bid by CD&R is particularly notable because BP’s current chairman, Helge Lund, serves as an operating advisor to the firm.

While insiders told Sky News that Lund has no involvement in CD&R’s interest in Castrol, the connection adds an unusual dimension to the unfolding transaction. Lund is set to step down as its chairman within the next year and the company is actively seeking a successor. Notably, Sky News recently reported that both Sam Laidlaw (former Centrica CEO) and Ken MacKenzie (ex-BHP chair) were considered for the role but have withdrawn from the selection process.

Castrol Sale Advances Amid BP Pressures

The auction for Castrol began earlier this year as BP continues to navigate a challenging strategic landscape. Other reported bidders for the lubricants unit include Apollo Global Management, Lone Star Funds and India’s Reliance Industries, per Bloomberg News. These suitors reflect a mix of global strategic and financial players vying for a stake in one of the oil major’s longest-standing divisions.

Castrol, known worldwide for its motor oils and industrial lubricants, has long been a profitable yet non-core asset for BP. The decision to divest comes as the company faces mounting pressure from activist investor Elliott Management, which is calling for cost cuts and improved returns. These internal demands, coupled with market speculation, have intensified scrutiny on BP’s direction.

Just last week, London-listed rival Shell publicly denied a Wall Street Journal report claiming early-stage acquisition talks with BP. Although Shell dismissed the rumor, the episode reinforced BP’s current vulnerability and its perception as a potential takeover target.

CD&R Expands its UK Portfolio

CD&R’s interest in Castrol aligns with its growing footprint in the United Kingdom. The firm already owns the Morrisons supermarket chain and Motor Fuel Group, a major fuel retailer. If successful, a Castrol acquisition would mark a significant expansion of its energy-adjacent portfolio.

A spokesperson for CD&R declined to comment and BP has not yet responded publicly regarding the ongoing auction process.

BP’s Zacks Rank & Key Picks

BP currently carries a Zack Rank #3 (Hold).

Investors interested in the energy sector may look at a few better-ranked stocks like EQT Corporation EQT, W&T Offshore, Inc. WTI and Oceaneering International, Inc. OII. EQT Corporation, W&T Offshore and Oceaneering International carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

As the largest natural gas producer in the United States, EQT Corp is well-positioned to capitalize on the growing demand for clean energy. With numerous premium natural gas drilling locations in the core Appalachian Basin, the company’s production outlook is solid. The firm aims for net-zero Scope 1 and 2 emissions from operations by 2025, underscoring its commitment to sustainability.

The Zacks Consensus Estimate for EQT’s 2025 EPS is pegged at $3.56. The company has a Growth Score of B.

W&T Offshore benefits from its prolific Gulf of America assets, which offer low decline rates, strong permeability and significant untapped reserves. The company’s acquisition of six shallow-water fields in the GoA added 18.7 million barrels of proved reserves and 60.6 million barrels of proved plus probable reserves. The firm is focused on strategically allocating capital toward organic projects, which should boost its production outlook. WTI has a Value Score of B.

Oceaneering International delivers integrated technology solutions across all stages of the offshore oilfield lifecycle. With a geographically diverse asset portfolio and a balanced revenue mix between domestic and international operations, the company effectively mitigates risk. As a leading provider of offshore equipment and technology solutions to the energy sector, OII benefits from strong relationships with top-tier customers, ensuring revenue visibility and business stability.

The Zacks Consensus Estimate for OII’s 2025 EPS is pegged at $1.79. The company has a Value Score of B. 

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This article originally published on Zacks Investment Research (zacks.com).

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