Repsol reaches agreement with Venezuela and will triple production in three years

RepsolRepsol's offshore platform

Renta 4 | Repsol has signed an agreement with the Venezuelan Ministry of Hydrocarbons and the state-owned company Petróleos de Venezuela (PDVSA) to regain operational control and increase oil production at Petroquiriquire (60% PDVSA and 40% Repsol). The deal also aims to guarantee payment mechanisms and strengthen the operational framework for its activities in the country, under the Framework Agreement originally signed in 2023. We recall that this agreement, amended in 2024, provides for the extension of the Petroquiriquire field concessions and incorporates the Tomoporo and La Ceiba fields.

Repsol’s current oil production in Venezuela amounts to approximately 45,000 gross barrels per day (~15,000 net barrels). This is expected to increase by 50% within 12 months and triple over the next three years, provided that the necessary circumstances persist and by utilizing the income generated within the country—meaning the operations will remain, at the very least, cash-neutral for the Company.

Assessment: Positive news that provides greater visibility into Repsol’s operations in the country, following the fulfillment of three necessary, though not sufficient, conditions: 1) the lifting of sanctions on Venezuela; 2) the issuance of General License No. 50A by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), which authorizes Repsol to engage in transactions related to oil and gas operations with the Venezuelan government and PDVSA; and 3) the signing of this agreement with the country’s authorities.

With the legal and cooperation framework now established between the parties involved, we expect the JV to begin resuming the investment required to reach approximately 90,000 gross barrels per day within the next 12 months and exceed 130,000 barrels per day within the next three years.

As a reminder, under the Company’s new reporting model, the contribution from JVs will be accounted for using the equity method. Consequently, the increase in CAPEX and expected cash generation should not impact Repsol’s accounts as long as no dividends are distributed—which we do not anticipate in the very short term, though we would expect it in the medium term should current conditions persist.

Regarding the collection of PDVSA’s legacy debt, valued at approximately €4.55 billion (~20% of market cap) and consisting of credits and outstanding invoices (~€963 million) and provisions (~€3.587 billion), it does not appear that the issue has been addressed, although we certainly believe it represents a necessary preliminary step.

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