Mexico’s Pemex ends 25-year partnership with Repsol

A section of the Mexico’s national oil company Pemex Pol-A Platform complex sits above the continental shelf in the Gulf of Mexico. Pemex sold most of its stake in Spain’s Repsol for €2.09bn, ending a quarter-century partnership and freeing up cash to invest in its own energy sector.

Reuters

Madrid/London

Mexico’s national oil company Pemex sold most of its stake in Spain’s Repsol for €2.09bn  ($2.9bn), ending a quarter-century partnership and freeing up cash to invest in its own energy sector.

Pemex’s exit as one of Repsol’s top three shareholders ends a relationship that had become increasingly fractious in recent years due to disagreements on policies ranging from top management to the handling of Repsol investments in Argentina.

The sale comes five days before Mexican President Enrique Pena Nieto makes his first official visit to Spain and as the Latin American country opens up its energy sector to private investment for the first time since 1938.

Pemex sold 7.86% of Repsol yesterday to unspecified private investors at €20.10 each, a 3.7% discount to the Spanish company’s closing price on Tuesday.

Two sources close to the matter said that the books were not covered, leaving bookrunners Citi and Deutsche Bank holding an unspecified number of shares.

Separately, HSBC Holdings declared a 5.37% stake in Repsol worth €1.4bn on Tuesday, becoming the oil firm’s fourth-largest shareholder behind lender CaixaBank , builder Sacyr and Singapore’s Temasek.

Shares in Repsol, which were suspended from trading ahead of the announcement, fell 4% to €20, below the price of the placement.

The question of whether Pemex could still partner with Repsol for deepwater exploration in the Gulf of Mexico is likely to be on Pena Nieto’s agenda when he meets Spanish Prime Minister Mariano Rajoy next week, according to Robert Tornabell, an economist at the Esade Business School. “Gulf of Mexico negotiations can now be country to country, without the stake issue getting in the middle. It is key for Spain to be able to import gas from Mexico that it can later send to the rest of Europe,” Tornabell said.

Repsol analysts welcomed the departure of Pemex, saying it should help ease boardroom tensions at Repsol and allow the Spanish group’s chairman, Antonio Brufau, to focus on acquisition plans.

“We believe that this gives Repsol management a free rein to decide on the next strategic steps for the company,” Exane BNP Paribas analyst Alejandro Demichelis said.

Repsol has raised $6.3bn from its exit from Argentina after that country seized the oil major’s YPF unit in 2012. It could spend part of the funds boosting growth at its upstream business, with a search for cash-generating oil assets.

It will also pay a 1 euro-per-share special dividend with part of the Argentine proceeds on June 6. After being left with a significant Repsol holding, Citi and Deutsche Bank said in a regulatory filing that a “guarantee” on the deal had come into effect, without giving details on the type of guarantee.

Deutsche Bank and Citigroup declined to comment. The banks’ position in Repsol may be as much as 6%, one banking source said.

Analysts said they do not rule out its second-largest shareholder, Sacyr, selling up to 4% of its Repsol stake in coming months as it tries to refinance a €2.4bn loan linked to its Repsol purchase before the start of next year.