Repsol sells exploration and production assets in Canada for $468M
Repsol has agreed to sell its oil and gas assets in Canada to Peyto for $468 million (approximately €433 million) as part of its ongoing portfolio management to focus activity on core regions.
The agreement encompasses all the mineral rights, related facilities and infrastructure in Repsol’s Canadian upstream oil and gas business, including the assets in the Greater Edson area with a net production of 23 kboe/d, of which most is gas.
The company is high-grading its upstream portfolio through rotation of assets to concentrate and consolidate production in key areas −preferentially OECD countries− with a special focus on the US, where Repsol has built a material position that benefits from synergies that generate greater competitive advantages.
The streamlining of the company’s portfolio has been achieved through a series of divestments in non-core countries − reducing Repsol’s E&P presence to 14 countries from 25 following the sale of assets in Vietnam, Malaysia, PNG, Australia, Greece, Morocco, Iraq, Bulgaria, Ecuador, and Russia − and focusing new development in key areas such as the US and Brazil, as well as carrying out targeted acquisitions in US shale and offshore plays.
Benefitting from the results of Repsol’s renowned exploration expertise, that allowed the company to make some of the most significant global discoveries of the last decade, the exploration portfolio has generated numerous opportunities that are now on track to be developed. Since 2020, Repsol has made 14 discoveries that have added significant resources, mainly in the United States and Mexico, whose development will contribute to maintain current levels of production until the end of the decade.
In line with Repsol’s strategic plan 2021-2025, the company’s upstream business is also on track to become a leader in reducing CO2 emissions in the sector, aiming to reduce its carbon intensity by 75% by 2025, from a 2016 baseline. This will be achieved through a focus on assets with less emissions per barrel while also working aggressively to improve efficiency and innovate processes using state-of-the-art technology and digital tools, as well as developing associated projects to capture and store CO2.
The value of the current asset portfolio and the company’s long-term strategy for its upstream business were crystalized through the partnership with EIG, which acquired 25% of the upstream business for $4.8 billion, thus, valuing the unit at $19 billion, exceeding analysts' consensus valuations. This agreement has enabled an advancement of the company’s net zero emissions objective through a project that accelerates transformation and reinforces the company’s multi-energy profile while reducing debt leverage and maintaining a strong cash flow to finance ambitious growth and attractive shareholder distribution.
Repsol retains commercial and logistic operations in Canada through its St John LNG facility and trading business.
The acquisition is expected to close in mid-October, subject to customary closing conditions, including the receipt of necessary regulatory approvals.
RBC Capital Markets acted as financial advisor to Repsol.
Peyto Exploration & Development Corp. (“Peyto”) is a Calgary, Alberta, Canada based dividend paying energy company which has been engaged in the acquisition, exploration, development and production of oil and natural gas in Western Canada. Peyto's portfolio of assets includes exploration and development opportunities located primarily in the Deep Basin of Alberta. Peyto uses its significant experience, operational and technical expertise to achieve the best return on capital employed through the development of internally generated drilling projects. Peyto's current production is approximately 100 kboe/d (converted on a 6:1 basis) and owns 12 natural gas plants with approximately 1 Bcf/d of processing capacity. Peyto's common shares are traded on the Toronto Stock Exchange.