• Spain's news in English

Repsol deal to lift energy giant into big league

AFP · 16 Dec 2014, 17:34

Published: 16 Dec 2014 17:34 GMT+01:00

Facebook Twitter Google+ reddit

The operation will boost Repsol's output by 76 percent to 680,000 barrels of oil equivalent while its reserves will increase by 55 percent to 2,353 billion barrels of oil equivalent, the company said.

"The combined company will be among the 15 largest privately-owned oil and gas companies in the world, present in key areas and with the most potential worldwide," Repsol said in a statement.

If the transaction is completed, Repsol -- which became a medium-sized player when Argentina nationalized its subsidiary YPF in 2012 — will have more than 27,000 employees in 50 countries.

Repsol's presence will be strengthened in North America, a market where Talisman is well placed, and South America, especially Colombia, as well as Algeria and the North Sea.

Buying Talisman also gives it access to the Asian market, from where it is currently absent, via Indonesia, Malaysia and Vietnam.

The deal, which is subject to regulatory approval, is expected to close in the second quarter of 2015, Talisman said in a statement.

Repsol said it would sell non-strategic assets picked up in the transaction once it is completed.

"This is an operation that frankly transforms Repsol," the company's chief executive officer, Josu Jon Imaz, told a news conference.

"It's a good agreement at the right moment," he added.    Repsol said the deal should be financed mainly with the $6.3 billion which Argentina paid it earlier this year in compensation for seizing control of YPF. Repsol lost huge oil reserves with the nationalization.

After the nationalization Repsol said it would build up its presence in nations that are members of the Organisation for Economic Co-operation and Development, a club of mostly rich countries, rather than exposing itself to greater political risks typical of emerging economies.

The purchase of Talisman will mean that Repsol will have almost half of its capital in exploration in North America, compared with 22 percent in Latin America.

The deal will also boost Repsol's more profitable oil extraction activities in comparison to refining and distribution.

By combining the businesses, Repsol said it expected to achieve more than $200 million a year in savings.

"This is an extraordinary operation for Repsol, for the hydrocarbon sector and for the Spanish economy," Spain's Industry Minister Jose Manuel Soria told reporters.

High price

Under the terms of the deal, Repsol will pay $8.3 billion for all of the outstanding shares of Talisman and will assume $4.7 billion in debt.

That amounts to $8.0 (6.42 euros) per Talisman share, a 24 percent premium over the average share price of the last three months.

Story continues below…

The price is "higher ... than discussed in the market", said RBC Capital Markets analyst Biraj Borkhataria.

Talisman said in July that it had been approached by Repsol but the Spanish firm reportedly pulled out because the price for the company was too high. 

Since then Talisman's shares have dropped.    

The Standard and Poor's ratings agency in October cut Talisman's credit rating to triple-B-minus, one notch above junk, citing concerns about the company's limited ability to generate enough cash flow to offset high operating costs.

Talisman loaded up on debt as it aggressively pursued overseas expansion. It is now struggling to reduce its debt load amid a slump in oil and gas prices.

"This deal creates significant and immediate value for Talisman stakeholders," Talisman head Chuck Williamson said in a statement.

For more news from Spain, join us on Facebook and Twitter.

Facebook Twitter Google+ reddit

Your comments about this article

Today's headlines
Dine in the buff at Spain's first nudist restaurant
A buffet of organic food will be served on "human tables". Photo: Innato / Facebook

Spain's first naked dining experience is to arrive on the island of Tenerife following the success of a similar venture in London.

Spain's top court overturns bullfighting ban in Catalonia
Photo: AFP

Spain's Constitutional Court on Thursday cancelled a bullfighting ban in Catalonia in what is likely to exacerbate tensions between Madrid and the separatist region, and between animal activists and fans of the tradition.

Out of the dark: Five years on from Eta ceasefire
Eta members made a ceasefire declaration in January, 2011. Photo: Gara / AFP

Five years after armed separatist group Eta declared a permanent ceasefire, Basque journalist Alberto Letona is still wondering when the dialogue will begin.

Hunt for ten most wanted Brit fugitives hiding out in Spain
Call Crimestoppers if you recognize these faces.

These fugitives from British justice are thought to be hiding out in Spain. Do you recognize anyone?

Eta 'not dead' but Spain focus moves onto jihadism
Archive photo of a pro-mural in the Basque Country. Photo: AFP

Five years after Eta quit violence, the Basque separatist group has yet to dissolve but it poses little threat and authorities have shifted their focus to fight jihadists, says Spain's chief anti-terrorism prosecutor.

Brazilian suspect in grisly Madrid murder turns self in
Marcos Campos Nogueira is the chief suspect in the murder of a married couple and their two children. Photo: Guardia Civil/Twitter

A Brazilian teenager suspected of dismembering his uncle and aunt and killing their two young sons in a grisly crime that shocked Spain has turned himself in to police.

Spain approves equal parental leave for fathers
Photo: Rietje Swart / Flickr

Fathers will now be allowed the same parental leave as new mothers, under measures agreed by Spain’s parliament.

Napflix: Spaniards launch very boring TV channel for siestas
Photo: Dickukne / Flickr

Do you have trouble sleeping? Then Napflix is the television channel for you.

Women in Spain will 'work for free' from October 21st
Women in Spain earn 19.3 percent less than men. Photo: World Bank Collection / Flickr

Spain's gender pay gap effectively means women won't get paid for the rest of the year, according to a new report.

The Local List
Nine incredibly  addictive television series from Spain
A still from Spanish TV series Velvet. Photo: Antena3.com

As the evenings draw in, what could be better than curling up on the sofa to watch a box set?

Sponsored Article
How to vote absentee from abroad in the US elections
Celebrate expat life at Madrid’s THRIVE convention
Sponsored Article
Last chance to vote absentee in the US elections
Disney announces plans for Don Quixote action movie
Activist tells 8-yr-old matador wannabe with cancer 'just die'
Sponsored Article
How to vote absentee from abroad in the US elections
King to make last minute push to avoid third vote in Spain
Amazing photos of Catalonia's 'human tower' contest
What's on in Spain: October 2016
'No way, Jose! You'll never get your hands on our Rock'
Recipe: How to make a classic Spanish tortilla de patatas
Chorizo in paella? Go back to cooking school Jamie Oliver
Spain in eye of a perfect storm after 10 months without govt
Thousands share clips of life for 'Spain in a Day' film
Ten incredible Spain locations for Game of Thrones season 7
Analysis & Opinion
Why moving to Spain could be the best decision of your life
Seven reasons why autumn is the very best season in Spain
Spanish study finds four types of personality. Which are you?
New search underway for civil war grave of poet Lorca
Bison found decapitated on Valencia nature reserve
Forgotten Voices: What Brits in Spain think about Brexit
One dead and 14 injured in blast at Spanish resort
Game of Thrones want extras 'with muscles' to film in Spain
Thousands march in Madrid to push for bullfighting ban
Spanish team invents hands-free 'penis bidet'
In pics: Devastation caused by Costa Blanca wildfires
jobs available