Spanish Oil Company to Sell LNG Assets

Brian Hicks

Written By Brian Hicks

Posted January 16, 2013

Spain’s largest energy company is set to sell around $2.7 billion in liquefied natural gas assets sometime by early February.

According to Bloomberg, an unnamed person mentioned that Repsol SA’s (MCE: REP) upcoming sale does not include debt, and the buying party is left unidentified.

The move seems to be intended to avert further ratings reduction by Moody’s Investors Service, which had previously dropped Repsol’s rating to just one level above junk status.

In addition, Moody’s gave the company a negative outlook last year following Argentina’s seizure of its YPF business, where nearly half of Repsol’s oil reserves were held, with no compensation.

All things considered, Repsol is clearly hoping to maintain its investment-grade debt rating, and the company is trying to dispose of nearly 4.5 billion euros of assets by 2016 to that end. It is also paying down borrowings heavily.

Fitch Ratings stated the company’s debt outlook was negative, while Standard and Poor’s called debt outlook stable, and both companies also slashed credit ratings.

Overall, Repsol’s net debt decreased by 1.9 percent over Q3 after the previous quarter to 12.9 billion euros. Asset sales, worth around 1.9 billion euros, along with a resurgent Spanish sovereign debt, have helped Repsol maintain and even improve on its debt situation.

Back in July, Repsol stated that it would be selling LNG assets, including a stake in a Peruvian liquefaction plant and another one in Trinidad & Tobago. Overall operating profit from the company’s LNG operations amounted to 386 million euros in 2011.

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