• LittleLaw
  • Posts
  • ⛽️ BP is selling Castrol (here’s why it matters)

⛽️ BP is selling Castrol (here’s why it matters)

AuthorAuthor

Idin Sabahipour & Laura White
December 31, 2025

Together with

Table of Contents

If you take just one thing from this email...

BP is selling part of Castrol to cut its debt — not because Castrol is failing, but because BP borrowed too much money during its push into renewables.

The sale helps BP protect its credit rating and calm investors, even though it means giving up a profitable business.

EDITOR’S RAMBLE 🗣

Happy New Year’s Eve! 🥳

(no, LittleLaw doesn’t stop — it’s application season!)

Before this week’s stories, I want to thank you, truly

This year has been a big one for LittleLaw — new products, new firm partnerships, and more people reading and engaging than I ever expected.

But none of that happens without you showing up, opening the emails, sharing them, and supporting what we’re trying to build: a newsletter to make the legal world feel less closed-off and intimidating.

I’m grateful to be able to do this. LittleLaw only exists because of the trust you put in it, and I don’t take that for granted for a second.

Thank you for being part of this.

Have a great New Year!

– Idin

P.S. Shout out to the law firm that grabbed trainingcontract.com back in 2003. If you want to know who it is, click the link (clue: it’s today’s law firm partner).

⛽️ BP is selling Castrol (here’s why it matters)

What’s going on here?

Castrol is a British company that makes engine oils and lubricants for cars, motorbikes, and industrial vehicles. At the moment, Castrol’s fully owned by BP.

But that’s about to change. Because this week, BP agreed to sell 65% of Castrol to Stonepeak, an American investment firm.

The deal is expected to complete by the end of 2026.

Why has BP decided to sell Castrol?

BP is selling Castrol because it needs to cut debt.

Over the past few years, BP spent heavily trying to move into renewable energy. It invested in wind and solar projects and bought companies like Archaea, a US biogas firm. A lot of this was funded with debt — plus, BP took on the debts of the businesses it acquired.

Those investments haven’t delivered the returns BP expected. They’ve made less money than its oil and gas business, while leaving BP with a large debt pile (its net debt stands at around $26 billion).

BP has since changed its strategy. It’s cutting renewable investment by about 70% and refocusing on oil and gas. It also wants to reduce its debt to around $14 billion by 2027.

Selling Castrol is part of that plan. The deal is expected to raise around $6 billion, all of which will go towards paying down debt. After this deal, BP will have raised about $11 billion from the sale of various assets.

Why does BP need to reduce its net debt?

Debt is not necessarily a bad thing. A lot of companies use it to fund growth because it’s usually cheaper than raising equity (selling new shares and giving up ownership).

The problem comes when debt grows faster than profits and starts to limit a company’s flexibility.

In BP’s case, there are two main issues caused by their debt levels.

📉 Investor pressure: Investors expect oil and gas companies to generate steady returns. High debt makes that harder because interest payments reduce profits.

BP is under particular pressure from the hedge fund Elliott Management, which owns around 5% of the company and is pushing for higher shareholder returns.

🏦 Credit ratings: BP also wants to protect its investment-grade credit rating. If its debt becomes too high, rating agencies could downgrade it.

Some key terms explained…

📊 Credit rating: A score given by agencies (like Moody’s or Fitch) that shows how likely a company is to repay its debt. A higher rating means lower risk.

💰 Investment grade: This is the minimum rating many large investors require. Companies with an investment-grade rating are seen as financially stable.

A lower credit rating would make borrowing more expensive and reduce the number of investors willing to lend to BP. In practice, this would make it harder and costlier for BP to raise money in the future.

By cutting its debt now, BP is trying to protect its credit rating, keep borrowing costs low, and maintain investor confidence.

How have the markets reacted?

BP’s share price rose by just over 1% when the deal was announced, but the gains didn’t last. The share price actually fell slightly later.

This reaction shows the market sees it as a trade-off. Selling Castrol helps BP reduce its debt, but it also means giving up a very profitable part of the business. In 2024, Castrol made around £187 million in profit.

Some analysts question BP’s approach. Castrol is stable, cash-generative, and cheap to run. They ask whether selling a strong, low-risk business to pay down debt is the right move.

One important part of this deal structure is something called a lock-up period, which affects what BP can do with its remaining stake after the sale.

What is a lock-up period?

A lock-up period is a set amount of time after a deal closes during which a seller isn’t allowed to sell their remaining stake.

It’s a bit like a seller agreeing to keep some of their own money in a business after selling it, to prove they still believe in it.

In this deal, BP has agreed to a two-year lock-up period. That means it can’t sell its remaining 35% stake in Castrol for at least two years (except in limited circumstances).

🤝 Benefits for BP: By agreeing to a lock-up, BP signals confidence in Castrol’s future.

Keeping money invested reassures the buyer, Stonepeak, that BP isn’t selling because the business is about to decline.

That confidence then helps BP secure a higher price for the stake it is selling.

🤝 Benefits for Stonepeak: The lock-up keeps BP’s incentives aligned with Stonepeak’s after the deal closes.

Because BP can’t exit immediately, it remains motivated to support the business, manage risks, and help the transition succeed.

In short, the lock-up ensures BP behaves like a long-term partner, not a seller walking away.

Which law firms are involved?

Freshfields is advising BP on the sale of its stake in Castrol.

Stonepeak is being advised by Simpson Thacher and DLA Piper, with Paul, Weiss advising on the financing side of the transaction.

How can you use this in your applications?

There’s a bunch of stuff you can take away from this deal.

The table below pulls out the key commercial lessons — and shows exactly how and where you can use them in applications.

Insight

How to use it in your applications

Deal structures manage trust and risk

Buyers and sellers often have different incentives or access to information. Deal structures like lock-ups or earn-outs help bridge that gap by keeping sellers invested after completion.

If you have a case study with a transaction, mentioning these where appropriate shows you understand that good deals aren’t always about price. They can be about managing risk and aligning both sides for long-term value.

Selling assets involves trade-offs, not just benefits

If you’re analysing a case where a company sells part of a strong business, avoid treating the sale as purely positive. In your answer, explain both sides of the decision.

For example, BP will improve its finances and reduce debt, but it also gives up a profitable and stable part of the business that generated reliable cash flow.

Credit ratings shape business decisions

In a case study, if you’re faced with a company carrying a lot of debt, explain that reducing it could help protect its credit rating. This keeps borrowing costs low and maintains access to capital.

This shows you understand why companies can prioritise reducing their debt over growing or profit.

Markets react to risk, not just announcements

If a company announces a deal and the share price barely moves, don’t assume the market doesn’t care. A mixed reaction could mean investors see both positives and risks.

TOGETHER WITH WOMBLE BOND DICKINSON* 🤝

What do trainees actually do on client work?

At Womble Bond Dickinson, trainees aren’t kept on the sidelines. They’re trusted early to work on live client projects with real world impact.

We recently broke down a WBD deal where their lawyers helped turn disused coal mines into clean energy for hundreds of homes in the North East. Plus, it shows you how trainees and juniors get involved.

Here’s what makes WBD’s training contract stand out:

  • Clients you actually recognise, including Five Guys, Nissan, HSBC, Sainsbury’s, and HS2

  • UK-rooted, with transatlantic work — exposure to US clients without losing the UK firm feel

  • Offices across the UK (not just London) — Bristol, Leeds, Newcastle, Plymouth, Southampton and Edinburgh

Womble Bond Dickinson looks for curious, collaborative people who want to understand clients.

There are no minimum grade requirements. The firm focuses on potential — how you think, learn, and approach problems.

The deadline is 23 January (get moving on this early in the New Year).

* This is sponsored content

IN OTHER NEWS 🗞

  • ⚖️ A lot happened in the legal world in 2025. This year, US politics shook Big Law, UK and US firms kept rushing into mega-mergers, and AI started to change the way lawyers work. There’s also been a growing pressure on the justice system, from court backlogs to legal aid chaos. Here’s a summary of the year’s biggest shifts.

  • 🤖 White & Case is rolling out legal AI tool Legora across all 43 of its offices worldwide. The firm says the move is part of a wider push to build AI into everyday legal work, not just as a trial but at scale. The message is clear: AI is no longer optional, and big firms want it incorporated into how they operate.

  • 💻️ CMS has rolled out Harvey (Legora’s main competitor) across its entire global network. The tool will be used by 7,000 lawyers in over 50 countries. CMS says lawyers are saving over 100 hours a year, helping cut costs and free up time for higher-value work. It’s another sign that big firms are no longer testing AI on the sidelines — they’re investing in it heavily (but not always the same tools).

AROUND THE WEB 🌐

STUFF THAT MIGHT HELP YOU 👌

  • 💻️ Free application advice: Check out my YouTube channel for actionable tips and an insight into the lifestyle of a commercial lawyer in London.

  • 📁 Law firm application bank: A growing library of real, verified successful applications for training contracts and vacation schemes. Helpful if you want to learn from others who answered the same questions you’re stuck on.

  • 📝 Write winning law firm applications: A practical course to help you write clearer applications, faster. Avoid common mistakes, learn how to structure answers properly, and get lifetime access to future updates. Try it for 14 days, risk free.

How did you find today's newsletter?

Login or Subscribe to participate in polls.