BP's "streamlining" plan unveiled, with Castrol at the forefront

BP is considering selling its lubricants business, Castrol, according to sources familiar with the matter, as activist investor Elliott Investment Management has built a stake of nearly 5% in the company.

The business, which operates under the Castrol brand, is valued at about $10bn, according to sources familiar with the matter. The sale is one of several options the company is considering to regain investor confidence after years of poor performance, according to sources familiar with the matter. The division is also one of the assets identified by Elliott as potential disposals.

BP is expected to announce the potential asset sale plan on Feb. 26, the company's capital markets day, according to sources familiar with the matter. Discussions about a potential asset sale are ongoing and no final decision has been made, according to sources familiar with the matter.

According to BP's website, the Castrol brand serves customers in more than 150 countries in the automotive, marine, industrial, aerospace and energy production sectors. Recently, the brand has expanded into developing liquid cooling technologies to help address overheating in data centers. Castrol has also become a globally recognized brand in the sports world through marketing partnerships with the NBA, WNBA and racing.

Last week, ZBJ Finance App reported that Elliott had built a stake worth about £3.7bn ($4.7bn) in BP and demanded the company slash costs and dispose of assets to secure its future as an independent company. Elliott wants BP to remake its business to look more like other oil giants such as Shell, cutting spending in areas such as renewable energy and divesting large chunks of non-core assets.

Analysts at RBC Capital wrote in a research note to clients on Feb. 9 that BP's lubricants business, which generates about $1bn of pre-tax, pre-depreciation, pre-amortization profit, could be worth about $8bn to $10bn. The "more aggressive" approach of activist investors could lead to the sale or spinoff of the lubricants, US shale and fuel marketing businesses, analysts said.

Under former chief executive Bernard Looney, BP had bet that oil consumption had peaked, only to fail. Since then, the company has struggled to articulate a clear turnaround strategy.

BP's share price has lagged rivals such as Shell and Exxon Mobil in recent years. Elliott has long invested in energy companies and pushed for change, including its activities at NRG Energy Inc and Canadian oil producer Suncor Energy Inc.