Repsol SA agreed to sell a 25% stake in Repsol Upstream, a newly formed global exploration and production company comprising Repsol’s entire global upstream oil and gas business to US institutional investor EIG for $4.8 billion, including debt. The deal contemplates a potential US IPO from 2026 onward, subject to market conditions.
A newly formed, wholly owned subsidiary of EIG, Breakwater Energy, will acquire 25% interest in the upstream business, while Repsol will retain 75% and operatorship of the new E&P business, which will be consolidated within the accounts of Repsol Group.
The upstream portfolio consists of assets in North America (US, Canada, Mexico), South America (Brazil, Peru, Bolivia, Trinidad and Tobago, Colombia, and Venezuela), Europe (Norway, UK), North Africa (Algeria, Libya), and Asia (Indonesia). Repsol expects to produce an average 570,000 boe/d in 2022 and has proven and probable reserves of 2.3 billion boe, of which nearly 70% is gas.
Since 2020, Repsol has made 13 discoveries since 2020 with total gross resources of more than 900 million boe, mainly in the US and Mexico.
The deal delivers upfront capital to Repsol to increase its investment in the energy transition, specifically to support the growth of Repsol’s renewable power generation, renewable fuels, and circular products segments.
“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 chief executive officer Josu Jon Imaz.
In line with its 2021-2025 strategic plan, Repsol has advanced the transformation of the company by deploying four business areas (upstream, industrial, customer, and low-carbon generation).
Repsol Upstream will maintain its workforce and existing management team as well as the current business plan, initially adopting Repsol’s GHG emissions targets, including a 75% reduction of carbon intensity by 2025 from a 2016 baseline. The company also has a green exploration business targeting carbon capture and storage (CCS), geothermal, and hydrogen storage projects, it said.
The company 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. EIG said it will also have the right to appoint two senior executives to the Repsol Upstream leadership team, one to serve as ESG director and the other to lead special projects, including IPO preparedness.
EIG’s farm-in deal is expected to close within the next 6 months once the corporate structure of the upstream business has been concluded, subject to customary regulatory approvals.