The historic year ahead for Repsol continues to set milestones. The oil company will reach for the first time the historic figure of 10,000 million profits before interest, taxes, debt and amortizations (ebitda). To contextualize the figure, let’s say that in terms of speed you will run the hundred meter dash in less than 10 seconds, something only achieved by Spanish companies such as Telefónica or Iberdrola -which achieve around 12,000 million in their case of gross operating profit- .
Each improvement in the average price of one dollar a barrel of oil translates into 60 million more ebitda at Repsol, to which is added the improvement in margins in the refining business due to the lack of facilities in Europe. Repsol will have had better years in net profit due to the sales made and the achievement of extraordinary results, but in gross profit it will be unbeatable.
But neither should it be ruled out that the income statement is also cum laude. The oil company has announced the sale of 25% of its renewables subsidiary for 905 million to Crédit Agricole and the Swiss fund Energy Infrastructure Partners. Added to this already confirmed operation is the unsolicited offer from the US fund EIG Global Energy Partners to buy 25% of the exploration and production business.
If the operation comes to fruition, the oil company chaired by Antonio Brufau will become the firm in the medium-sized sector with the greatest muscle to accelerate the transformation of the business from dirty to clean energies, a process of green transition in which Repsol is a pioneer because in December 2019 it already surprised us by being the first oil company to announce net zero emissions by 2050.
I do not doubt that most of the cash generation that the oil company will accumulate will be used for sustainable investment. In this equation, it should not be forgotten that Brussels considers natural gas (and nuclear) green energies in its taxonomy, which accelerates speculation that Repsol is preparing to integrate Naturgy, which is stuck in the Gemini process of splitting up the business regulated and the liberalized, and, in between, penalizes him for breaking the treaty of good friendship with Algeria with Sonatrach. Further speculation, there is also talk of a merger with Galp, but history shows that Iberian integrations are not easy or successful.
But apart from all the investments, which are not immediate or simple, we must not forget that today’s history of the oil companies is being built with a view to large international investors with more dividends and share buybacks. Repsol’s cum laude year, I am convinced that it opens the door to extraordinary remuneration. In the past, additional payments from Repsol were already made when YPF sold to Argentina and Brazil to Sinopec.
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