Repsol to divest 25% stake in O&G business: press
Spanish energy group Repsol has launched talks with private equity firm EIG Global Energy Partners to offload a 25% stake in its upstream oil and gas segment, Reuters reported June 7, citing unnamed sources.
EIG submitted an unsolicited offer for Repsol's upstream unit, which Reuters' analyst value at between $15bn and $19bn, including debt. The private equity firm, which specialises in energy and energy infrastructure deals, last year led a $12.4bn acquisition of a 49% interest in Saudi Aramco's oil pipeline system.
Repsol's upstream portfolio is gradually being downscaled as the company looks to focus on renewables investments. It plans to spend around €1.6bn/yr on upstream in the 2021-25 period, down from €2.4bn in 2019. By the end of this period, Repsol aims to have 6 GW of renewables capacity, as it strives towards its 2050 net zero objective. It expects to have 1.2 GW of hydrogen production capacity by 2030.
Repsol still has oil and gas production in North America, Bolivia, Colombia, Venezuela, Trinidad and Tobago, Brazil and Libya, with gas accounting for 70% of its proven reserves. While the number of markets it operates in has been reduced, Repsol has elected to focus on higher profitability E&P plays. From 2021 to 2025, Repsol's production costs are expected to average at around $0.8/barrel, down from $2.5 in 2016 to 2020.
Inadvertently, the expenditure cuts allowed Repsol to reap greater value from its Russian interests than some of its Western peers. Repsol was able to dispose of all its Russian assets before the war in Ukraine and subsequent sanctions. The last of its Russian holdings – concerning stakes in the operating consortia Evrotek-Yugra and ASB GEO – were offloaded in January to Gazprom Neft.
Activities at Repsol's Spanish upstream assets have now ceased, and the company also disposed of its stakes in Malaysia, Ecuador, Vietnam, Norway and Algeria. The remaining upstream assets absorb more expenditure/barrel than many of Repsol's peers, Reuters said.