Sunday, February 5, 2023

Repsol sells 25% stake in its upstream business to EIG for US$4.8 billion

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Repsol said it is partnering with United States multinational investor, EIG, in its upstream business, in a boost to its multi-energy transformation.

EIG is set to acquire a 25% stake in Repsol’s upstream unit for US$4.8 billion. The transaction, approved by the Board of Directors of Repsol, values the upstream business at US$19 billion. Repsol said this exceeds analysts’ consensus valuations of the unit. The agreement includes the likelihood of a minority stake of the business being listed in the United States from 2026, subject to favourable market conditions, Repsol said.

“This pioneering agreement allows us to maintain the strategic direction of the upstream unit and, at the same time, to boost the transformation of the company and its multi-energy profile to achieve zero net emissions by 2050,” Repsol’s Chief Executive Officer (CEO) Josu Jon Imaz said.

Repsol will retain control of the upstream business, as a majority shareholder. The upstream business will continue to be consolidated in the Repsol Group’s accounts. It plans to appoint four directors to the eight-person board, including the chairman with a casting vote. EIG will appoint two board members and the other two will be independent directors.

The newly structured entity will maintain its workforce and existing management team as well as the current business plan, focused on further strengthening, high grading, and decarbonising its global portfolio, Repsol said. The business will adopt existing Repsol upstream targets and policies, elevating them with EIG standards.

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The transaction is expected to close within the next six months once the corporate structure of the upstream business has been concluded, subject to customary regulatory approvals.

EIG is a provider of institutional capital to the global energy and infrastructure sectors and committed to influencing ESG industry best practices across its portfolio. With four decades of industry experience and a long-term track record of investing capital in energy, EIG has committed more than US$41.5 billion to the energy sector across 38 countries.

“Energy transition informs every decision we make, and we are thrilled to partner with a global leader of Repsol’s stature on this compelling opportunity to lead change in our industry,” R. Blair Thomas, EIG’s Chairman and CEO said. “As the world looks to meet the twin goals of decarbonization and reliability, we believe this partnership is well positioned to help meet the growing global demand for accessible, efficient, and safe energy.”

Repsol said its global upstream portfolio will see it producing an average of approximately 570,000 barrels of oil-equivalent per day in 2022 and has proven and probable reserves of 2.3 billion barrels of oil-equivalent, of which nearly 70% is gas.

The portfolio of upstream assets is made up of strategic areas in North America (U.S., Canada, Mexico), South America (Brazil, Peru, Bolivia, Trinidad and Tobago, Colombia, and Venezuela), Europe (Norway, UK), North Africa (Algeria, Libya), and Asia (Indonesia).

Repsol is the operator of the Kanuku license offshore Guyana with a 37.5% working interest. It is partnered with Tullow Oil (37.5%) and TOQAP (25%). The partners recently completed drilling at the Beebie-Potaro exploration well. While they encountered good quality reservoirs in the primary and secondary targets, both targets were water-bearing.

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