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Spain’s Repsol cuts dividend as ramps up renewables

Spain’s Repsol cuts dividend as ramps up renewables

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Larger peers BP and Royal Dutch Shell broke a long-standing sector taboo by cutting their dividends earlier this year as the COVID-19 pandemic strangled fuel demand, but Shell hiked its payout again last month

MADRID: Spain’s Repsol will cut shareholder payouts and channel more funds to its lower-carbon business over the next five years as it spends less on oil and gas production, it said on Thursday.

Repsol, whose shares have lost 35 per cent of their value this year in a sector-wide slump, lowered its 2021 and 2022 dividend to 0.60 euros per share in cash, from one euro per share, but said buybacks could push returns above one euro per share by 2025.

Its shares fell more than 2.5 per cent at the market open in Madrid, against a broader market that was down only slightly.

Larger peers BP and Royal Dutch Shell broke a long-standing sector taboo by cutting their dividends earlier this year as the COVID-19 pandemic strangled fuel demand, but Shell hiked its payout again last month.

Repsol, an early mover among oil and gas firms in pledging to cut or offset all the emissions produced by the products it brings out of the ground, said it would reduce operating expenditure on oil and gas exploration and production by 15 per cent over the next five years.

Lower-carbon ventures, including renewables and biofuels, will receive 30 per cent of a planned 18.5 billion euros ($22.1 billion) in capital expenditure (capex) over the period. Last year, investments in the lower carbon business were 17 per cent of capex.

The company aims to have installed 15 gigawatts (GW) in renewable generation capacity in 2030, up from 3 GW in 2019.

Repsol said it was considering bringing in partners to its low-carbon generation business, or listing that unit on a stock exchange.

It also set a target to produce 64,000 tonnes a year of hydrogen, a fuel seen as potentially key to decarbonising industry, from renewable sources by 2025.

The new plan is based on the assumption that Brent crude oil prices remain at $50 per barrel and the gas reference Henry Hub is valued at $2.5 per million British thermal units.

The free cashflow breakeven price, indicating how much a new project must generate, is less than $40 per barrel for the period. Brent crude is currently trading at $48.38.

Source: reuters
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Anand Gupta Editor - EQ Int'l Media Network