Repsol disposals pressure easing due to rising oil price - advisers - Merger Market
The recovery in the oil price means that Repsol [BME:REP] can afford to keep its ambitious disposals program on ice for the time being, said two energy advisers and a person briefed on the situation.
Crude oil prices are currently trading around USD 45 after hitting a high of USD 50 a barrel in June. Prices have traded as low as USD 30 after collapsing below USD 100 in 2014.
The ratings agencies have worked on an oil price assumption in the “low 30s,” said the person, adding that any price above that level helps Repsol’s metrics. The company could accelerate its disposals programme if its investment grade rating came under threat, this news service reported in May.
The recovery means that the Spanish oil company is less stressed overall, said the first adviser.
The Madrid-based company plans to sell assets that are not linked to the oil price to raise EUR 3.1bn for 2016-2018 and a total of EUR 6.2bn by 2020. The company is closing deals that will bring its disposals so far to EUR 2.8bn, or 90% of its target for 2016-2018.
Repsol is highly unlikely to put its North Sea business on the block, said both advisers, the person and two bankers. There has been a question mark over the business since news broke in May that China Petroleum & Chemical Corp (Sinopec) [HKG:0386] is seeking USD 5.5bn repayment from a joint venture with Talisman, which was taken over by Repsol in 2015.
The company said that Sinopec’s claim is “baseless” and is a remote risk. The litigation means that it would be very hard to find a buyer, even if Repsol decided to sell, said the first adviser and one of the bankers.
A depressed post-Brexit UK pound also makes UK oil and gas more attractive in the near term, as reported. Oil is a commodity that is traded globally, so local issues tend to be less important, said the second adviser.
Repsol does not have any further disposals on its radar in the short term, the person said.