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Repsol (REPYY) to Divest Papua New Guinea Assets to Balang


Repsol, S.A. REPYY recently decided to divest its stake in Papua New Guinea gas exploration properties to Singapore-based Balang International Pte. Ltd. The acquirer is part of China Changcheng Natural Gas Power Co. Ltd., which is a major investor in Asia Pacific’s natural gas and power sectors. Notably, Repsol bought the properties from Talisman Energy in 2015.

Repsol owns mining rights in nine blocks in the country including five development blocks with 1,303 square kilometers of net surface area and four exploration blocks with 7,418 square kilometers of net surface area. The asset sale includes around 40% of its stake in Elevala/Ketu and Stanley fields in the Western LNG project. The divestment is expected to close by the fourth quarter of 2018 but until then, Repsol will keep operating the business.

The divestment is in line with the company’s revised strategy, which came recently following its completion of targets way before deadlines. The company divested around €9 billion worth of assets by the end of 2017.

The divestment streamlines the company’s portfolio. Moreover, the proceeds from the sales can support Repsol’s plan of investing €15 billion ($17.6 billion) in its operations, in the 2018-2020 time frame. Repsol will employ €8 billion in upstream businesses, which is expected to help the company reach its production goal of 750 thousand barrels of oil equivalent per day by 2020. The company will invest €4.2 billion in its downstream businesses. Additionally, Repsol intends to invest €2.5 billion in its several energy projects, which will focus on low emission.

Price Performance

Madrid-based integrated energy company, Repsol has gained 19.6% in the past year compared with 23.1% growth of its industry.

Zacks Rank and Stocks to Consider

Currently, Repsol carries a Zacks Rank #3 (Hold). Investors interested in the Energy sector can opt for some better-ranked stocks like Anadarko Petroleum Corporation APC, Delek US Holdings, Inc. DK and HollyFrontier Corporation HFC, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Woodlands, TX-based Anadarko is an exploration and production company. For 2018, its bottom line is likely to be up 244.4%. In the last reported quarter, the company delivered a positive earnings surprise of 20.1%.

Brentwood, TN-based Delek is an energy company. The company’s top line for 2018 is anticipated to improve 39.2% year over year, while its bottom line is expected to increase 230.2%.

Dallas, TX-based HollyFrontier is an independent refining company. For 2018, its bottom line is likely to be up 145.3%. In the last four reported quarters, the company delivered an average positive earnings surprise of 41.3%.

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