-- Robert Campbell is a Reuters market analyst. The views
expressed are his own --
By Robert Campbell
NEW YORK, Sept 12 Mexico's plodding state oil
monopoly Pemex rarely catches anyone by surprise but its shock
stake-building in Spain's Repsol may well be the exception that
proves the rule.
Pemex [PEMX.UL] announced in late August it would nearly
double its stake in Repsol (REP.MC) to nearly 10 percent and
join with the Spanish group's biggest, and most disgruntled
shareholder, Sacyr Vallehermoso SVO.MC.
Officially Pemex says its increased stake is part of an
"alliance" that will give it access to Repsol's technology to
help it develop deep water oil fields in the Gulf of Mexico.
If so, this is one of the oddest energy alliances ever
By partnering with Sacyr, a construction group, to exert
more control over the Repsol board, Pemex has joined up with a
company that has placed itself in opposition to Repsol
management over the last two years.
It is hard to see Repsol Chief Executive Antonio Brufau
happily letting Pemex access Repsol's deep water technology
while the Mexican company is trying to get him fired.
So what on earth is Pemex doing? In short, it is far from
clear. Despite attempts to make itself more transparent, Pemex
remains among the most opaque arms of the Mexican government
and its public explanations fail to convince.
The claim that the share purchase, which was not even
discussed by Pemex's own board of directors, will lead to some
sort of alliance with Repsol is doubtful at the very least and
begs far more questions than it answers.
Sacyr's motives are more evident.
Since Sacyr announced at the end of 2006 that it had lifted
its stake in Repsol to 20 percent, the Spanish oil company's
shares have fallen more than 26 percent, handing Sacyr a more
than 1.5 billion euro paper loss on its investment.
This loss looks all the worse given Sacyr's heavy borrowing
--just under 5.2 billion euros-- to fund the last stage of its
Brufau incurred Sacyr's wrath in 2009 by cutting Repsol's
dividend, hitting the debt-laden construction book where it
hurt as the financial crisis deepened.
In short, Sacyr needs to find a way to get itself out of a
big hole and Pemex seems to have taken up the challenge.
Its press release announcing the shareholders' pact with
Pemex makes this clear.
According to the release, Sacyr and Pemex want better
corporate governance at Repsol, including splitting up the job
of chief executive and chairman of the board, and the adoption
of measures to boost cut costs and boost synergies among
Repsol's subsidiaries in an effort to boost the share price.
So is Pemex simply trying to make money by boosting
Repsol's share price?
The Mexican government wants Pemex to generate more value
and become more businesslike.
But how buying more shares in Repsol fits into this
mandate, particularly as Pemex will add to its already enormous
debt pile to fund the transaction, is unclear.
The Repsol shareholding is a tiny fraction of Pemex's
assets, so boosting the Spanish company's share price will have
at best a modest impact on the balance sheet.
Nor is it clear that the purchase, at a cost of more than
1.5 billion euros, will lead to any meaningful technology
Pemex has antagonized Repsol's current management, and even
if Brufau is replaced it does not follow that the Spanish
company will embrace Pemex.
After all, alliances are usually negotiated between
companies and rarely thrust upon unwilling managers.
Speculating in shares is not Pemex's core business, unlike
crude oil production, which is at risk of decline as Mexico's
fields age, or oil refining, where inefficiency and waste in
Mexico rack up gigantic losses year after year.
Pemex would do well to pay more attention to fixing its own
business than trying to fix Repsol.
(Editing by Alden Bentley)