Repsol considers selling minority stake in South Texas oil assets, sources

Repsol to Sell Minority Interest in Eagle Ford Shale Assets

Repsol, the Spanish oil giant, is gearing up to sell a minority stake in its Eagle Ford shale assets located in South Texas. This move, potentially valuing the assets at up to $2 billion, aims to bring in non-operational partners who would share in sale revenues while covering part of the operating costs. These partners, however, will have no involvement in the day-to-day extraction activities.

Details of the Sale

According to sources familiar with the negotiations, Repsol has enlisted Scotiabank for assistance and is open to selling up to a 49% interest in the assets. These holdings include over 800 actively producing wells spread over approximately 80,000 net acres, yielding about 50,000 barrels of oil equivalent daily. While Repsol seeks a partner, it aims to retain majority ownership and operational control.

The sources emphasize that a final deal is not a given and that discussions are still under wraps. Repsol and Scotiabank have both refrained from commenting on the matter.

Strategic Background

In recent post-pandemic years, oil and gas companies have seen substantial profits as fossil fuel demand hit unprecedented levels. However, some projections suggest that global oil consumption might peak within this decade, precipitating a shift toward renewable energy sources. In this scenario, major energy companies are offloading non-core assets while partnering with non-op players on profitable projects. This strategy enables them to reduce costs and generate funds to enhance shareholder returns and invest in alternative energy initiatives such as biofuels.

Repsol's Strategic Focus

Repsol, in February, laid out a focused strategy targeting areas of 'competitive advantage and higher value' in preparation for a potential IPO in the U.S. by 2027. The Eagle Ford assets have been identified as one of these core growth regions. Complementing this strategy, Repsol announced a comprehensive plan to return 4.6 billion euros to shareholders through dividends and share buybacks worth up to 5.4 billion euros by 2027. As part of this financial roadmap, the company aims to raise around 1.5 billion euros this year through asset sales and stake rotations.

Ongoing Asset Sales

The plan to bring in non-op partners for the Eagle Ford assets follows other similar moves by Repsol. Last month, it was reported that Repsol and its partner Santos are contemplating the sale of a minority stake in their jointly held oilfields in Alaska.

Conclusion

Repsol's concerted efforts to streamline its portfolio and enhance investor returns indicate a broader industry trend as firms pivot towards more sustainable energy solutions. While the outcome of the Eagle Ford asset sale remains to be seen, it underscores the ongoing recalibration within the energy sector.