Repsol Cuts Upstream Spending to Focus on Renewables

Spain's Repsol announced its 2021-2025 strategic plan on November 26, under which it will scale back upstream investment to free up capital to spend on renewables.

The company expects to invest €18.3bn ($21.8bn) in total in 2021-2025, of which €5.5bn will go towards its low-carbon business, one of four segments in a new organisational structure it also announced. The others are industrial, consisting of refining, trading and wholesale and gas trading; customer, which includes mobility, retail and energy solutions; and upstream.

Repsol's goal is to expand its renewable generation capacity by 500 MW annually between 2020 and 2025, up to 7.5 GW. It aims to double this capacity to 15 GW by 2030. Annual investments should reach €1.4bn by 2025, or eight times more than it spent on renewables in 2019, but Repsol expects the business to also generate eight times more in core earnings by that point, or €331mn. 

Repsol will still invest more in upstream activities during the period, some €8bn. But this is only €1.6bn/year, compared with €2.4bn in 2019 and a €2.6bn annual spend in its previous 2018-2020 strategic plan.

The company will also shift its focus from growing to only maintaining production. It expects its oil and gas output to average 650,000 barrels of oil equivalent/day over the period, which is the same as its 2020 guidance. At the same time it will cut back on exploration spending and continue disposing of assets where its geographical presence is limited.

Repsol will also shave a third off its dividend to €0.60/share in 2021 compared with 2020, to help finance the expansion in renewables.