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Repsol (REPYY) to Divest Upstream Assets to Hibiscus Petroleum

Repsol SA REPYY decided to divest its oil and gas exploration and production assets in Malaysia and Block 46 CN in Vietnam to a subsidiary of Hibiscus Petroleum Sdn Bhd.

Notably, Peninsula Hibiscus, a wholly-owned subsidiary of Malaysia-based Hibiscus Petroleum, signed a sale and purchase agreement with Repsol to obtain the latter’s entire ownership interest in Fortuna International Petroleum Corporation (“FIPC”) for $212.5 million.

FIPC, through its wholly-owned subsidiaries such as Repsol Oil & Gas Malaysia Ltd (“RML”), Repsol Oil & Gas Malaysia (“PM3”) Ltd, and Talisman Vietnam Limited (“TVL”), has ownership interests in various production sharing contracts. Notably, this includes a 60% interest in the 2012 Kinabalu Oil PSC oilfields offshore Sabah, which is currently owned by RML.

The transaction involves a 35% interest in the PM3 CAA production sharing contract, 60% in the 2012 Kinabalu Oil PSC, 60% in the PM 305 PSC, 60 % in the PM 314 PSC, and 70% in Block 46 CN, which is a tie-back asset to the PM3 CAA production units. Most importantly, the assets represent nearly 2% of Repsol’s current net output globally.

Repsol mentioned that the divestitures backed its 2021-2025 plans to reduce its presence from 25 to 14 major countries and focus on geographic areas with higher competitive advantages. The company has been focusing its upstream activities on 14 significant projects centered on producing basins and accomplished through lean modular development by prioritizing value over volume.

The proceeds from the transaction and the resulting capex savings will contribute to the company’s basic objectives of sponsoring major projects and the latest low-carbon initiatives. The agreement is subject to regulatory approval and the waiver of partners’ pre-emptive rights.

Notably, the transaction follows Repsol’s divestments of producing assets in Russia, the discontinuation of oil-producing activities in Spain and its exit from exploratory activities in several countries.

Company Profile & Price Performance

Headquartered in Madrid, Spain, Repsol is an integrated energy company, which advocates energy transition.

Shares of the company have outperformed the industry in the past six months. Its stock has gained 32.1% compared with the industry’s 20.1% growth.


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Zacks Rank & Stocks to Consider

The company currently carries a Zack Rank #3 (Hold).

Some better-ranked players in the energy space are Crescent Point Energy Corporation CPG, NOW Inc. DNOW and Smart Sand, Inc. SND, each currently sporting a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Crescent Point’s earnings for 2021 are expected to increase 27.6% year over year.

NOW’s earnings for 2021 are expected to surge 397.8% year over year.

Smart Sand’s earnings for 2021 are expected to surge 130.4% year over year.

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