Repsol invests in bid to offset blow from YPF
SPANISH oil firm Repsol will cut its dividend and sell billions of dollars of assets to help fund an investment drive aimed at boosting production, as it battles to recover from the seizure of Argentine business YPF.
In its first strategy update since most of its 57 per cent stake in YPF was nationalised by Argentina last month, Repsol said yesterday it would invest €19.1bn over four years, with 77 per cent earmarked for exploration and recent discoveries.
The group, which bought YPF in 1999 to reduce its exposure to the less lucrative refining business, said this would help to drive annual output growth of more than seven per cent from 2012-16, compared with less than five per cent targeted by most peers.
However, Repsol shares tumbled over seven per cent as investors were disappointed by the dividend cut and questioned whether the ambitious targets were achievable.
To help fund the investment and defend its credit rating, Repsol said it would reduce its dividend payout, which had been much higher than the European sector average, to between 40 and 55 per cent of earnings, down from 63 per cent.
Chairman Antonio Brufau said the board would decide the final dividend but that it would “certainly be lower than the current €1.15 per share”.
Repsol’s credit rating was put on negative watch by Moody’s and cut by S&P after the YPF nationalisation.
Repsol forecast net profit would grow 80 per cent over the four years from the €1.7bn it made in 2011, excluding YPF and based on an oil price of around $80 a barrel.