Bankinter | Repsol (REP) has almost 15% of its global oil reserves (for extraction, in the form of concessions) and 12% of its production in Venezuela, the country with the largest proven reserves in the world, approximately 17% of the total. Before the arrival of the Chavista regime, daily oil production in the country was 3.5 million barrels, compared to the current 0.9 million out of a total of 103 million/106 million barrels worldwide.
Bankinter analysis team’s view: We consider the most likely outcome to be the reconstruction of the Venezuelan economy, with the rehabilitation of oil production and refining facilities after years without investment being a fundamental part of that process. In this context, Repsol should be one of the companies to benefit, although probably less so than US companies for political reasons. However, its position in Venezuela should help rather than hinder it… unless the United States questions the concessions currently in force.
Despite the uncertainty, the most likely scenario today is that the market will give it the benefit of the doubt and the share price will rebound, although only modestly until the uncertainty surrounding the current concessions is resolved. We maintain our Buy recommendation, with a target price of €18.8 per share.
