Investment group EIG is buying a 25% stake in Repsol’s upstream unit for $4.8 billion, with an eye on a potential US IPO in 2026.
Repsol said the deal would provide it with upfront capital that it would use to advance its energy transition goals.
“Our ambition is to lead the energy transition. 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,” said Repsol CEO Josu Jon Imaz.
The deal values the upstream unit at $19bn. It should close within six months.
Repsol said the deal with EIG sets the scene for an IPO in the US in the future, although allowing this was subject to favourable market conditions.
EIG chairman and CEO R Blair Thomas said the deal was a “compelling opportunity to lead change in our industry”.
© Supplied by RepsolThomas went on to say ESG considerations were at the core of EIG’s investment plans. “We look forward to working with Repsol, a world-class operator and energy transition leader, to continue building on the business’s ESG best practices. 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.”
EIG will invest in the unit via a new subsidiary, Breakwater Energy.
Making plans
Repsol Upstream covers the entirety of the Spanish company’s global exploration and production interests. It will produce around 590,000 barrels of oil equivalent per day in the second half of this year, from 549,000 boepd in the first half. Its proven and probable reserves are 2.3bn boe, of which 70% are gas.
Repsol aims to cut carbon intensity by 75% by 2025. It is also working on a number of other transition plans. These include a green exploration business, focused on carbon capture and storage (CCS), geothermal and hydrogen.
EIG will have the right to nominate two of Repsol Upstream’s eight directors. It will also be able to appoint two senior executives. These will focus on ESG and on “special projects”, which include preparing for IPO.
RBC Europe said the deal valued Repsol’s upstream unit at 85% of its estimated EV for the group, “reflecting how the market has been undervaluing these assets. As such, we see this deal as good for the sector in unlocking value for the majors.”
In related news, Reuters has reported that Repsol is working to sell off its conventional heavy oil production in Alberta. The news agency named Canada Pension Plan Investments Board as the buyer.