Repsol Sells 25% Stake in Upstream Unit to EIG, Aims for U.S. Listing

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Repsol Sells 25% Stake in Upstream Unit to EIG, Aims for U.S. Listing
Credit: © Reuters.

By Geoffrey Smith -- Repsol (BME: REP ) is to sell a 25% stake in its upstream oil and gas business to U.S. investment group EIG, unlocking capital that it will redeploy in a transition to greener energy.

Spain's biggest oil and gas producer said it will receive $4.8 billion for the stake, valuing its total upstream business at $19 billion. The sale is the first part of a strategy under which Repsol will distance itself from its traditional hydrocarbons business, aiming to reduce its net carbon emissions to zero by 2050. The strategy foresees a possible listing for the business in the U.S. from 2026 onward, subject to market conditions.

"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 CEO Josu Jon Imaz said in a statement.

Repsol is primarily a producer of natural gas , which accounts for around 70% of its total daily output of 570,000 barrels of oil equivalent. The sale comes at a time when upstream producers are riding high due to the sharp rebound in global energy demand after the pandemic, and the phenomenal squeeze on prices created by Russia's invasion of Ukraine and the West's response in the form of sanctions.

The valuation of the deal suggests that the market attributes little or no value to the rest of Repsol's businesses at the moment. Its total market capitalization at Monday's close was under $19 billion.

Repsol intends to keep a majority stake and operational control of the business. Repsol will 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.

By 04:00 ET (08:00 GMT), Repsol stock in Madrid was down 1.2%, underperforming both the Spanish benchmark IBEX 35 index and its European oil and gas peers.

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