Spanish energy group Repsol has agreed to sell a 25% stake in its oil and gas exploration and production unit to U.S. fund EIG for $4.8 billion including debt.
The deal values the whole business at $19 billion including debt, and may lead to a U.S. stock market listing of a minority stake in the unit from 2026 onwards, Repsol said in a statement.
The process started with an unsolicited offer from EIG, sources told Reuters earlier this year.
News of early talks sent Repsol’s shares to a 14-year high in June. Analysts at Madrid-based CM Capital Markets said on Wednesday that the announcement was “positive news for the stock”.
The deal promises to bring in cash as Repsol looks to invest in growing its renewables business, in line with other European oil and gas companies who are facing pressure from shareholders and regulators to cut their planet-warming carbon emissions.
Repsol will retain control of the so-called upstream unit. Chief Executive Josu Jon Imaz said EIG was “prepared to invest with us in the future of upstream”.
“We need to reduce the carbon footprint of our products but we will continue to need oil and gas for many more years. Society will have a problem if we don’t produce them,” he said.
Based in Washington DC, EIG specialises in private investments in energy and energy-related infrastructure. Last year, it led a consortium that spent $12.4 billion on a 49% stake in oil giant Saudi Aramco’s pipelines business.
Repsol’s total market value has risen almost 30% this year after COVID-19 brought it crashing to multi-year lows, and is currently around 19.6 billion euros ($19.4 billion).
Oil and gas firms’ upstream divisions are typically complex, and Repsol has been working to simplify a structure of more than 100 individual units.
It has disposed of stakes in exploration businesses in several countries, and sold its Russian assets to Gazprom Neft in January.
The group has pledged to plough more than one third of its investments by 2025 into low-carbon projects and ensure its products emit no more carbon than can be absorbed by natural sinks like forests, or systems like carbon capture, by 2050.