* Chairman hopes to get YPF settlement cash in two years
* Prioritises purchases over shareholder remuneration
* Up to $6.5 bln available for acquisitions in upstream
By Tracy Rucinski and Andrés González
MADRID, Feb 26 Spanish oil major Repsol
said on Wednesday it was on the lookout for acquisitions to
boost its exploration and production (E&P) business following
the bruising loss of its Argentine energy arm two years ago.
On Tuesday Repsol's board approved a $5 billion settlement
from Argentina for the expropriation by Buenos Aires of its
majority stake in YPF, drawing a line under a two-year
Chairman Antonio Brufau said the company hoped to sell bonds
from the settlement in the next two years and invest the cash in
growing its business rather than returning more to shareholders.
Its strategy contrasts with that of other European oil
groups such as Royal Dutch Shell and France's Total
, who are sacrificing investments to hand cash back to
Repsol already has the second highest dividend yield among
peers at 5.3 percent, making it one of the few oil majors that
is combining a growth strategy with shareholder returns.
The Madrid-based company's current dividend is worth about 1
euro per share in the form of cash or shares and it has a plan
to buy back 500 million euros' worth of capital this year.
Brufau said the share buyback programme would continue
beyond 2014 but held back from pledging to increase the amount.
"We shouldn't go crazy," he said, adding that the best way
to remunerate shareholders is by adding value to the shares,
such as in the form of a bigger, more profitable company.
Repsol is in the middle of a four-year plan to gain size to
better compete for international exploration projects and to
compensate for the loss of YPF, which had accounted for over
half its output.
"As Repsol tries to rebuild its strategy post-YPF, Mr.
Brufau has been consistent in trying to move it away from Latin
America and into OECD," Raymond James analyst Bertrand Hodee
Brufau estimates it will have between $6 billion and $6.5
billion to spend on acquisitions after the gradual sale of
Argentine bonds and the disposal of its remaining 12 percent
stake in YPF.
That treasure chest could grow with the potential sale of
its 30 percent stake in Gas Natural Fenosa, worth about
5.5 billion euros.
The company is especially eyeing opportunities in North
America, for which one source said it has hired JP Morgan as an
Repsol's investment grade credit rating came under pressure
after the YPF seizure, forcing it to sell liquefied natural gas
assets to Royal Dutch Shell to improve its finances. Brufau said
he was "totally convinced" that the YPF compensation would be
positive for its credit rating.
By signing off on the YPF deal, Brufau is also ending a
bitter chapter among key shareholders who had been pushing for a
quick end to the bilateral conflict, though doubts remained over
how long they would stay with the company.
Mexico's Pemex has been one of Brufau's most outspoken
critics, threatening to sell its 9.5 percent stake if the chief
doesn't resign. Brufau sought to soothe tensions on Wednesday by
opening the door to resurrecting a business alliance between the
While Repsol's two other main shareholders, lender Caixa
, with 12 percent, and indebted builder Sacyr
, with 9.5 percent, are also considered potential
sellers, analysts said both were likely to wait for Repsol's
sale of its YPF and Gas Natural stakes before trying to cash
Analysts estimate that the Argentine settlement and the sale
of the 12 percent stake in YPF alone could add some 3.5 euros to
Repsol's current 18.58 euro share price.
Some market players said Repsol could become a takeover
target once it receives cash from stake sales, but Hodee of
Raymond James dismissed that theory.
"Repsol is a predator, not a target," he said.