The Spanish oil integrated company, Repsol YPF, S.A. (REP) is keen to adopt its Brazilian pre-salt oil reserves model for the development of Western Africa properties. The company recently said that its pre-salt oil reserves model experienced solid success in the development of areas off Brazilian coast. The initiative should also drive the company’s upstream growth.
Repsol is keen to develop its substantial acreages in Africa, including areas in Sierra Leone, Liberia and Equatorial Guinea through this pre-salt oil reserves model. It is also looking for opportunities in Gabon and Angola.
The pre-salt oilfields are trapped beneath a layer of salt under almost 7,000 meters of sea water and rock and are among the most inaccessible on earth. Many other international oil companies such as Chevron Corp. (CVX) are now showing interest in the African pre-salt potential, especially in Angola.
Repsol has been very active on the exploration front in the last couple of years, resulting in some of the world’s largest oil and gas finds in the period. The company expects to reach a reserve replacement ratio of 125% by 2012.
Though Repsol’s reserve replacement ratio had been suffering in the recent past (proved reserves declined 8% in 2007 and 2008 each), it showed signs of improvement last year with a ratio of 94%.
The company has taken several measures for upstream growth including the goal to reduce its stake in its Argentine counterpart YPF, as upstream growth at YPF is lagging.
Repsol also said that the company is pursuing various opportunities in Indonesia and Russia. It already has stakes in three Indonesian blocks, and two more are pending government approval. In Russia, the company said it is identifying opportunities. However, Repsol’s premium valuation accounts all these positives, which are reflected in our Neutral recommendation with the Zacks #3 Rank (Hold).
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