Deal is the latest in a series of partnerships the Spanish major has tabled during 2022 involving its upstream and renewable energy units
Spanish major Repsol has sold a 25% stake in its exploration and production business to EIG Global Energy Partners, a US-based institutional investor focused on energy infrastructure.
The transaction, worth $4.8 billion, valued Repsol’s entire upstream business at $19.2 billion and raises the possibility of a potential US listing from 2026, depending on market conditions, according to a statement by Repsol.
Repsol’s chief executive Josu Jon Imaz stressed the agreement furthers the company’s net-zero strategy.
“Our ambition is to lead the energy transition. This 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,” he said.
The company has set a target of reducing the carbon intensity of its upstream business by 75% by 2025, compared with 2016 levels.
“The additional financing that this agreement entails for Repsol as a whole will allow us to finance and accelerate other important growth projects that are fundamentally involved with decarbonisation,” Imaz said.
In July this year, the company launched a venture capital fund with Suma Capital to support decarbonisation technologies in Europe and North America. It is also leading a consortium of developers looking to set up hydrogen networks in Spain.
Repsol said the business will “continue to focus growth” on key regional hubs and assets in Organisation for Economic Co-operation and Development countries. It added its upstream division is prioritising the development of short-cycle projects that can be managed flexibly and with limited capital intensity.
The stake will be nested within IEG’s newly formed subsidiary, Breakwater Energy.
In a note to investors, analysts at financial services company Jefferies said the stake divestment “implies a 28% upside to consensus valuation for this business” and that Repsol “remains materially undervalued”.
On the prospect of an initial public offering of the business in the US, the analysts added: “Considering EIG expertise in the US could unlock further value crystallisation potential”.
The deal with EIG is the latest in a series of partnership contracts the Spanish major has been involved in this year.
In June, the company sold a 25% stake in its renewables business unit to French insurance company Credit Agricole Assurances and Swiss investor Energy Infrastructure Partners for €905 million ($898.5 million).
It also reached partnership deals with Pontegadea and The Renewables Infrastructure Group for Repsol’s wind and solar assets in Spain.
Earlier in the year, national oil company Saudi Aramco and Repsol joined forces to build a synthetic-fuel plant in the port of Bilbao.
After the deal, Repsol will retain overall operational control of the upstream business and consolidate it within the wider group. It will appoint four out of eight board directors, and a chairman, while EIG will appoint two members. The remaining two members will be independent directors.
The company posted a more than fourfold rise in profit for the second quarter of 2022 against the previous year, boosted by high oil and gas prices.
Repsol has moved more decisively into the energy transition space than many of its peers, and was the first major oil company to declare a net-zero target.
The Madrid-based company has proven reserves of 1.9 million barrels of oil equivalent — of which 70% is gas —and produces around 570,00 barrels of oil equivalent per day net.
EIG chief executive Blair Thomas commented: “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.”
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