Spanish oil major Repsol SA is shopping for a North American oil company as it seeks to increase its investments in politically stable countries and the U.S. energy boom, according to people familiar with the talks.
Spanish oil major Repsol SA is shopping for a North American oil company
as it seeks to increase its investments in politically stable countries and the
U.S.
energy boom, according to people familiar with the talks.
The Madrid-based company has told investment bankers in recent months that it
is ready to spend $5 billion to $10 billion for a
U.S.
or
Canadian exploration and production company, preferably one that produces much
more oil than natural gas, these people said.
A spokesman for Repsol said he couldn't comment on the company's acquisition
plans.
A North American acquisition would help Repsol bolster its presence in
stable-market economies. The Spanish company is among the integrated European
oil companies most heavily exposed to frontier oil-exploration areas such as
Morocco
and
Sierra
Leone
, according to a recent
Bernstein Research report. Working in those countries carries the promise of
more-profitable oil production as well as risks.
Civil war and armed assaults have disrupted output in
Libya
. In
the spring of 2012,
Argentina
's
government nationalized Repsol's Argentine unit, YPF SA.
By expanding in countries such as
Australia
,
Norway
and
the
U.S.
in
recent years, Repsol has been seeking a better balance of production-growth
potential and risk.
After the setback in
Argentina
threatened its investment-grade credit rating, Repsol raised billions of euros
by selling assets and diminished its dividend payout to shore up its
creditworthiness. Its annual production growth is among the highest among
European oil majors. Repsol shares are up about 50% since July 2012.
Now running a smaller and financially fortified company, Repsol management this
year began a search for takeover targets that would allow the company to regain
scale.
A bid from Repsol would give a jolt to the
U.S.
oil
patch, where deal-making has fallen off this year and is on track for its
lowest level since 2009, according to data provider Dealogic. Several
U.S.
companies around the size that Repsol seeks have recently explored sales
without finding buyers, including Whiting Petroleum Corp. and Kodiak Oil &
Gas Corp., which have stock-market values of about $6.4 billion and $3 billion,
respectively.
Some large energy producers in
North America
are
pursuing initial public offerings of stock amid a hot market for new shares. They
include Antero Resources Corp., which is backed by Warburg Pincus LLC, and EP
Energy LLC, which is owned by Apollo Global Management LLC, Riverstone Holdings
LLC and others. Both of those companies fit roughly with the budget Repsol has
given bankers.
The financing Repsol would need for such a deal is likely to become available
by year-end, when the sale of most of the company's liquefied-natural-gas
business to Royal Dutch Shell NV is expected to bring in $4.4 billion before
taxes.
Repsol is also planning to divest itself of part or all of a <euro>4.5
billion ($5.98 billion) equity holding in Spanish utility Gas Natural SDG SA. Bankers
working on Repsol's behalf have been trying to find buyers among Asian and
Middle Eastern sovereign-wealth funds and European utilities, people familiar
with these discussions said.
The Spanish oil major's office in suburban Houston is its fastest-growing, and
the company has drilling interests in the Gulf of Mexico, Oklahoma, Kansas and
Alaska. In recent years, it has secured rights to drill in a handful of
exploratory blocks in
Canada
.
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