Repsol is focusing half of its investment until 2028 in Spain and Portugal

MadridRepsol has updated its current 2024-2027 strategic plan and extended it to 2028, at a time marked by the conflict in the Middle East and its impact on energy supply and costs, particularly on raw materials such as oil and gas. "We had doubts [about doing it]," acknowledged the company's CEO, Josu Jon Imaz, during the plan's presentation to analysts this Tuesday. But the leading oil company in Spain and fourth-largest electricity company has decided to put this conflict aside and present the plan it has drawn up for the next three years: "A solid foundation on which the company stands," Imaz said, referring to the plan. The executive anticipated that it is "too early" to know what the impact of the war will be on the energy market, but he was cautious in making comparisons with the scenario four years ago, when the war broke out in Ukraine. He also said that Repsol does not have a "direct" exposure in the Middle East region. "The oil that comes from that area is a very small part," he stated. The new plan forecasts an average Brent crude oil price of $65 per barrel between 2026 and 2028, far from the $100 it reached this week due to the conflict in the Middle East. But also far from the 2025 annual average ($69 per barrel).

"Selective" investments

Repsol presented a plan based on "financial strength, investment discipline, and improved shareholder returns." In fact, it is increasing shareholder remuneration through dividends and share buybacks because the planned investment for the coming years will be "selective," as the company stated in a press release. While it does plan to invest between €8.5 billion and €10 billion by 2028, the outlay will be allocated to projects already approved by the company and is slightly lower than current figures. For example, during the 2024-2025 period, it invested an average of €3.9 billion per year, and in this new period, it will invest a maximum of €3 billion annually. Of that money, 30% will be allocated to "low-carbon initiatives," the company states. By region, Spain and Portugal account for 55% of the investment, and 34% will be allocated to the United States, its other strategic market.

Dividend Rain

Regarding shareholder remuneration, Repsol will distribute €3.6 billion in cash dividends until 2028. This dividend could range from the current €1.051 to a maximum of €1.267 in 2028 in the best-case scenario. An additional €2 billion to €3.5 billion will be added through share buybacks. All of this will help boost shareholder returns by an average of 6% each year until 2028. "This proposal provides certainty for shareholders, even in the most challenging scenario," the energy company stated. The company's share price started Tuesday's trading session with a drop, but recovered throughout the day. By 5 p.m., the shares were up a modest 0.24%.

A significant portion of this remuneration (between 30% and 40%) can be paid thanks to projected cash flow. Repsol expects to reach €18 billion in cash flow from operations during the 2026-2028 period. This helps investors understand the company's liquidity and solvency, as well as its ability to repay its debts.

Exploration and Production Business

Although it plans to continue growing in all business areas to strengthen its "multi-energy" profile, Repsol will dedicate a significant portion of its investments to hydrocarbon exploration and production, primarily in the United States. The company estimates that by 2028, production will reach 580,000 to 600,000 barrels of oil per day, between 6% and 10% higher than in 2025, with 40% of that production coming from the United States. "These projections could be increased by the improved situation in Venezuela," the oil company states, which anticipates raising production in the country by 50% and tripling it within three years.

The other pillars of the business are industrial activity, notably its refineries in Spain and Portugal; The customer, where Repsol aims to strengthen its position as a multi-energy group, and finally, the low-carbon business, where it plans to reach 9,000 MW by 2028 "while limiting financial exposure".