Spanish oil giant Repsol SA announced Thursday it will sell 6.2 billion euros ($7.1 billion) of “non-strategic” assets and cut spending by 38 percent between 2016 and 2020. The move, which also includes a significant cut in its oil-exploration spending, comes just a day after the company said its net profit is expected to fall to between 1.25 billion euros ($1.4 billion) and 1.5 billion euros ($1.7 billion) this year from 1.61 billion euros ($1.84 billion) a year earlier.
“The plan includes a broader integration of refining and marketing activity, with divestments in non-strategic assets and a clear goal of reducing energy costs and carbon dioxide emissions,” Repsol, which is reportedly this year’s worst-performing integrated oil company in the STOXX 600 oil and gas index, said in a statement.
The move comes months after Repsol completed an $8.3 billion takeover of the Canadian company Talisman Energy Inc. Since then, much like its rivals, Repsol has been hurt by a massive slump in global oil prices, caused by a weaker Chinese demand, supply glut in the U.S. and OPEC’s decision to keep output at its current level. Global oil prices are estimated to have fallen by 50 percent over the past 12 months, reaching levels last seen during the aftermath of the 2008 recession.
Combined with the job cuts announced earlier this year, the latest plan can be seen as an effort to keep shareholder returns stable in a scenario of low oil prices and marks a significant shift in focus -- from aggressive growth to increased profitability. The over $1 billion in asset sales announced by Repsol over the past month will also go toward meeting the targets outlined in the strategic plan.
“We are presenting a plan with a clear vision, and measurable commitments,” Repsol CEO Josu Jon Imaz said in the statement. “This plan not only shows our solidity and resilience, but also how far we can go in terms of creating value and strength for our company.”
Repsol shares, which have dropped nearly 24 percent on the Madrid stock exchange this year, extended their losses Thursday, trading down 2 percent.