Adds background and context
Spain's Repsol said it is analysing opportunities and proposals related to its recently streamlined exploration and production business, but that no decision has been taken.
The integrated oil and gas company issued the statement to Spain's stock market regulator in response to "media reports". Reuters reported earlier on Tuesday that US investment fund EIG Global Energy Partners is in preliminary talks with Repsol to buy up to 25pc of its upstream oil and gas division.
In its statement Repsol said it considers the upstream business to be "strategic, which includes its maintenance and consolidation in the long term". The upstream business produced 558,000 b/d of oil equivalent (boe/d) in the first quarter this year, down by 13pc compared with the same period in 2021.
Repsol has already been talking to investors about selling stakes in some of its other businesses. The firm has spent two years seeking potential investors for its international renewable energy division, either by floating or selling a minority stake in the business. A final decision is expected shortly. Repsol also said in 2020 that it is open to offers for a stake in its restructured retail business, which includes a portfolio of power and gas clients and more than 3,500 service stations in Spain and Portugal.
Repsol sees its upstream oil and gas business as a cash generator that will help it finance the company's transformation through the energy transition. At the same time its 2021-25 strategy includes the goal of refocusing its upstream operations on low-cost assets that yield high profits and plenty of cash, while also reducing upstream capital spending by a third.
The Spanish company plans to cut its upstream oil and gas exposure to 14 countries at the most, from more than 25. It has also adopted a new "highly selective" exploration strategy that focuses on already proven productive basins, where any discoveries can be brought on stream quickly. These include Alaska's North Slope, the US and Mexican zones of the Gulf of Mexico, Colombia and Indonesia.
This refocused upstream strategy may interest third parties, particularly private equity investors keen to achieve returns from oil and gas projects over a medium-term timeframe. For Repsol, attracting private capital would help it spread the risk of upstream investment while freeing up capital to spend on in its growth businesses, such as its core downstream operations, its renewable power assets and its burgeoning hydrogen business.
Repsol is not alone among its fellow European oil and gas companies in seeking partners and alternative ways of raising capital for its activities. Italian peer Eni began a process of unlocking value across its business in February when it floated shares in its 70pc-owned Var Energi upstream joint venture on the Oslo stock exchange. Eni then floated an energy transition-focused special purpose acquisition company called New Energy One Acquisition on the London Stock Exchange. It also intends to float its Plenitude retail, renewables and e-mobility company later this year.
