Repsol YPF SA (REP) on Wednesday said it will invest approximately $1.6 billion in Bolivia over the next five years. This is to boost natural gas production in the country.
Following the nationalization of the oil and gas industry in 2006, Bolivia needs investment in this sector, which has been scaled back since then. Repsol wants to speed up its investment by incurring approximately $300 million each year for the next five years. The investment is expected to be spent on drilling seven wells and expanding a processing plant.
Repsol is a major investor in Bolivia and owns substantial reserves in that country. The company is targeting stable production growth, driven by its development projects in Trinidad and Tobago, Libya, Bolivia, Venezuela, Argentina and Ecuador. Like the Bolivian investment plan, Repsol had also made a contract extension in the recent past with the Government of Ecuador for operation at Ecuador’s Block 16, which includes an investment commitment of an estimated $173.5 million through 2018.
However, we continue to believe that the host of challenges facing the company will continue to weigh on valuation, limiting its upside from current levels. This is characterized by declining reserves, weak volumes, very low reserve lives and rising costs. We are maintaining our Neutral recommendation for Repsol ADRs.
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