By Laurence Iliff and Ilan Brat
Mexico's state-owned oil company Petróleos Mexicanos, or Pemex,
is unloading most of its stake in Spanish oil company Repsol SA,
selling shares worth around $3 billion and winding down a
decadeslong partnership that had turned sour in recent years.
In a filing with the Madrid stock exchange, Citigroup said it
was selling 104.1 million shares, or 7.9% of Repsol, in a private
placement on behalf of Pemex. Deutsche Bank was the other book
runner for the sale, which Citigroup said was expected to take less
than a day to complete.
The shares represent most of Pemex's 9.3% stake in Repsol.
Mexican government officials have said selling the stake would
be in Pemex's interest given that it can use the money at home on
exploration and production. Under an energy overhaul passed last
year by Congress, the company will face competition from private
and foreign companies that will be allowed back into the oil and
gas sector for the first time in 76 years.
Despite greatly increased annual investment budgets, including
$27.7 billion planned for this year, Pemex has been unable to raise
its crude oil output from around 2.5 million barrels a day in
recent years as its easily extracted oil runs out and it tackles
more complex and expensive-to-produce reserves.
The Mexican state company has had a rocky relationship with
Repsol Chairman Antonio Brufau in recent years, and through its
position on the Repsol board had unsuccessfully attempted to
dislodge him from his post.
Pemex had no immediate comment on the sale. A spokesman for
Repsol in Madrid declined to comment.
The stake sale throws into question the future of any
cooperation at a time when Pemex is expected to begin joining with
private firms to develop reserves in Mexico.
"There's not really anything strategic that has come out of the
relationship. There's been talk of collaboration, but nothing
beyond technical exchange agreements they have with other
companies," said John Padilla, managing director of energy
consultancy IPD Latin America. Pemex could either keep the proceeds
abroad and invest in projects that give it badly needed
experience--such as partnering in the U.S. in shale gas or deep
water oil projects-- or use the money for its operations inside
Mexico, Mr. Padilla said.
For decades, Pemex kept a low profile in its partnership with
Repsol, rotating the representatives that it would send to Repsol
board meetings. But the alliance deteriorated under the previous
Pemex management, which doubled its stake in Repsol and sought to
oust Mr. Brufau via a shareholder pact with struggling construction
company Sacyr-Vallehermoso SA. The 2011 pact fell apart after Sacyr
had to sell half of its 20% Repsol stake to pay debt.
Pemex and Repsol patched up the dispute, signing an accord to
cooperate on upstream and downstream business opportunities. The
partnership fared no better after Mexico's change of government in
2012 and the appointment of current chief executive Emilio Lozoya
to head Pemex, who has been critical of returns on the investment
in Repsol.
The divorce is also unlikely to faze the Spanish company, which
is flush with cash after selling the bonds it received from
Argentina as compensation for the country's 2012 expropriation of
its local unit, YPF SA in a deal Pemex helped to broker, and
unloading the remaining stake it held in YPF.
Although Repsol executives have repeatedly said they're willing
to collaborate with Pemex to help boost Mexico's oil production by
investing there, the Madrid-based company is focused on growing by
buying oil companies or assets in wealthy countries like Canada or
Norway.
Anthony Harrup contributed to this article.
Write to Laurence Iliff at laurence.iliff@wsj.com and Ilan Brat
at ilan.brat@wsj.com
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