Repsol is the Spanish oil major company, which is listed on many of the trading platforms around including that of AG Markets.
Interesting Facts About Repsol
The oil industry has been hit hard worldwide by falling oil prices. The fundamentals behind this do not look to change anytime soon, especially as Iranian oil will be available in the global markets in Q1 2016. Therefore, only energy companies who take proactive steps to protect their bottomlines and their investors will be able to ride the storm well into 2016. This is where the situation with Repsol gets interesting, as the company seems to have taken some steps in this regard.
- Spanish oil major Repsol has announced plans to sell more than 6 billion Euros ($6.89 billion) of its assets. Additionally, Repsol plans to cut $2.6billion in its capital expenditure over the next five years. These two moves have been made to enable it cut its debt profile as well as protect the dividends of its investors.
- As part of its cost-cutting measures, Repsol will reduce its global workforce by 6% within the next 3 years.
- Repsol acquired Canadian oil firm Talisman last year in a deal worth more than $8bn. The deal was facilitated by debt and even though the production capacity of Rpsol has been boosted, the debt used in financing this deal was actually weighing the company down. Therefore, by taking active steps to reduce this debt burden, Repsol is aiming to cover its costs and deliver returns at a “break-even” price for crude of just $50 a barrel, around where market prices are now after a collapse from last year’s peak of more than $115.
The company believes that by cutting any planned expenditure on its new projects, reducing the level of exploration and cutting supplier costs, it would be able to get a savings close to 2.1 billion Euros per year for the next three years. By shifting its strategic focus from growth to value delivery, the company believes that it would be able to step up its cash flow to about €10bn, which would reduce its level of borrowing and yet keep shareholders happy by covering the costs of dividend.
Repsol’s Technological Advances in Oil Exploration
Repsol’s measures in riding the oil price slump seems to have taken away focus on what makes this company a leading player in the oil industry. Over the last 10 years, Repsol has invested massively in research and development of cutting-edge, innovative exploration technology. This is due to the long-term commitment that the company has made to differentiate on exploration.
Repsol developed Kaleidoscope, a new technology that was able to correlate seismic imagery from sites which were shown to have proven deposits, with sites that had potential deposits. This technology was created with input from the IBM computing centre in Barcelona, and was able to use algorithms that could synthesize the data about 50 times faster than could be done previously, thus helping Repsol to move towards its goal of achieving 100% certainty with subsurface models. The use of Kaleidoscope has led to discovery of deposits such as Seat in the Brazilian pre-salt and many other deposits which yielded 15 times more hydrocarbons than the industry average.
Other technology developed and used by Repsol include:
- Sherlock, which locates new deposits by comparing the geological structure around existing deposits.
- Excalibur, a predictive tool that uses mathematical models to increase rates of exploration success.
- Pegasus, a global cognitive technological program developed in conjunction with IBM for the oil industry
- BOLT, a collaborative effort with RSI (Rock Solid Images), which combines seismic imagery with electromagnetic data. This represents one of the most advanced models of locating new hydrocarbon deposits available in the market.
Repsol combines the drive for innovative technology with early deployment, all packaged within cost/benefit models that are designed to yield profits in the short, mid, and long-term. Repsol’s work with several partners into which it has entered into collaborative agreements has enabled fresh ideas to be brought to the table and positioned it well ahead of its competitors.
When all these fundamentals are considered for investment purposes, Repsol is actually undervalued and would be a great addition to the portfolios of value investors who would look beyond the present crisis and lay hold of oil stocks with a lot of future potential. Historically, oil prices have always bounced back from any lows to stage upticks in price. While past performance is not always indicative of future price action, there is presently little in the horizon to suggest otherwise.