Spain’s Repsol to sell six billion euros in assets

Repsol SA said Thursday it will sell EUR6.2 billion ($7.1 billion) worth of noncore assets through 2020 as part of a cost-cutting drive, which also includes a significant cut in oil-exploration spending.

“The plan includes a broader integration of refining and marketing activity, with divestments in non-strategic assets and a clear goal of reducing energy costs and carbon dioxide emissions”, Repsol, which is reportedly this year’s worst-performing integrated oil company in the STOXX 600 oil and gas index, said in a statement.

Repsol is still aiming for a full-year increase of earnings before interest, tax, depreciation and amortisation (EBITDA) but it switched on Wednesday to a target cleaned of inventory effects, which is deemed easier to achieve in the current context of lower oil prices. The plan aims to keep shareholder returns stable in a scenario of contained oil prices and represents a significant shift in focus from growth toward increased profitability.

“The management is committed and has the tools to protect the rating provided there is no new fall in oil prices or in refining margins”, said Standard and Poor’s, which recently attached a negative outlook to Repsol’s rating of BBB-/A-3.

According to an internal document seen last week by Reuters, the company will also cut its global workforce by 6 percent, or around 1,500 jobs, over the next three years.

The move comes less than a year after Repsol bought Canada’s Talisman for $8.3 billion, a deal that has boosted its production but which swelled its borrowing.

The company said the strategic plan ending in 2020 would offer an opportunity to build strength and create value during a depressed oil economy. In September, it sold part of its piped-gas business to Gas Natural Distribution and Redexis Gas for EUR651.5 million, and its 10% stake in oil pipeline operator Compania Logistica de Hidrocarburos for EUR325 million. The over $1 billion in asset sales announced by Repsol over the past month will also go toward meeting the targets outlined in the strategic plan.