Monday, March 27, 2023

Repsol shows faith in oil’s rally with dividend, spending boost

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(Bloomberg) — Repsol SA, Spain’s largest oil producer, plans to raise dividends and investments over the next two years on a bet that crude will remain above $50/bbl.

The scrip dividend — a payout to shareholders in stock — will climb to 1 euro in 2020 from a planned 90 euro cents this year, according to a strategy update from the company, which said buybacks are planned to avoid dilution. The move underlines the oil industry’s increasing confidence that crude prices will hold up after emerging from a three-year slump.

Repsol has earmarked 15 billion euros ($17.6 billion) in capital expenditure for the three years through 2020, up from 11 billion euros in the previous three-year period, it said Wednesday. About 4 billion euros of the total will go toward expanding retail operations and developing low-carbon businesses.

Major oil producers around the world, which implemented sweeping cost cuts during the market downturn, are reviving growth plans as crude tops $70/bbl, up from less than $30 in early 2016. Not only are they boosting investments in their traditional businesses, but they’re increasingly targeting renewables and electric cars too as the shift to cleaner energy gathers pace.

Repsol, which sold a stake in Spain’s Gas Natural SDG SA for 3.8 billion euros this year, plans to use the proceeds to “develop a new operated position in low-carbon businesses,” while also investing in gas and power retail, the Madrid-based producer said. The announcement follows a decision, reported last month, that it’ll no longer seek significant growth in its oil business.

The company’s shares rose as much as 2.8% to 16.88 euros, and were at 16.87 euros as of 10:01 a.m. in Madrid, making it the best performer on Spain’s IBEX index.

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