Repsol: The Sleeper Oil Trade of 2009?

Irwin Greenstein, writing for Contrarian Profits, suggests that Repsol (REP), an oil major from Spain, could prove to be the sleeper oil play of 2009. With significant new oil finds, Repsol could put investors in a position to pocket gains.This from Irwin:

In one of the stealth oil developments this year, Cuban officials said last week that the Communist country is embarking on an aggressive exploratory drilling program to assess the potential offshore reserves.

Cuba has been relying on companies from China, Central America and the Middle-East for years now to pump crude from offshore rigs. This latest effort, 20 miles north of Havana, represents a new surge in drilling that could start as early as the second quarter in the Gulf of Mexico.

The biggest winner here for investors could be Repsol YSF. S.A., the oil major based in Madrid, Spain. Repsol will lead a consortium of drillers that includes India's state-run Oil & Natural Gas Co. and Norway's StatoilHydro. Additional exploratory drilling in the region of the Gulf under Cuba's economic control is anticipated in 2010 and 2011.

Repsol has been drilling in cooperation with Cuba for at least the past five years. While some skeptics believe that the estimated 20-billion barrels of recoverable oil could be too deep to justify production, Repsol has extensive experience in deep-water drilling.

If the news is good here, it could be the impetus that the stock needs to recover – putting investors in a position to pocket some gains.

Reposol currently trades on the NYSE at about $18, near the bottom of its 52-week range of $16.04 - $44.85.

The company has a market cap of $22.48 billion. Along with its subsidiaries, Reposol is involved in the exploration, development and transportation of oil, natural gas and liquefied natural gas. Its main markets include Spain, Argentina, Brazil, and Bolivia. As of December 31, 2007, it had 951,578 thousands of barrels of crude oil; and 8,156,157 millions of cubic feet of gas, as well as 6,514 service stations.

Repsol has made a significant new oil find in the deepwater area of the U.S waters of the Gulf of Mexico. Other recent discoveries include new gas discoveries in Peru and Algeria, and oil in the deep waters of Brazil's massive Santos Basin.

Reposol could have been dragged down by low crude prices versus any fundamental flaws in its operation. A top-line look at Reposol's numbers indicate an upward trend in revenues.

On November 13, 2008, the company posted net income of $3.63 billion in the first nine months of 2008, a 15% rise on the year-earlier period.

Repsol 's operating profit, a measure of the company's ordinary business, reached $6.54 billion, a rise of 18.9% year-on-year.

Profits across its major business units rose in most of its major business units. For example, its LNG unit saw a rise of 20.5% during the period over the previous year.

At the same time, Repsol agreed to pay a gross dividend of $1.29 per share from 2007 earnings, a raise of 39% from the previous year.

With these results, Repsol could prove to be the sleeper oil play of 2009. Oil prices continue to bump along the bottom and worldwide consumption of fuel will probably stay flat. Still, it appears that Repsol has hit bottom and is the way to long, slow climb upwards.

Disclosure: no positions

Comments

[tango28]

Add Lybia to thelist of places that
REP operates. This company is sleeer. . .and they do habla espanol ....

2009 Feb 13 10:14 AM

[Oil Finder]

Don't you think that the increase in profits in 2008 had more to do with the increase in the price of oil than anything else? The real question is will those increases continue? That is hard to believe when oil prices have fallen from a high of $147 per barrel in July 2008 to below $40 per barrel just six months later.

2009 Feb 13 01:17 PM

[User 283977]

Several of the "opportunities" mentioned involved deep water drilling. I would think low oil prices would limit Repsol's deep water drilling opportunities.

2009 Feb 13 02:49 PM

[socphd71]

I am long Sherritt International. Two-thirds of the company's business involves mining nickel and cobalt (cobalt is found with nickel) in Cuba. After preliminary refining, it is shipped to Canada for final refining. I believe that most is (or was) sold to China. The other one-third of the company includes oil wells and refining operations in Cuba. Late last month, Cuba nationalized one field in which Sherritt was a partner. Before the nationalization, the only buyer for Cuban oil (the nationalized Cuban oil company) was behind on its payments on Sherritt and its partner, Pebercan.

So beware of the dangers of nationalization should Repsol be successful in developing new oil fields.

Sherritt trades under the symbol SHERF.PK in the US and S on the Toronto exchange. On Yahoo, ask for S.TO

2009 Feb 13 05:29 PM

[Delojozafado]

I am long the REP-PA. After the drubbing in the market this past Monday it now sports a 10% yield. Profits up or down pieces of the third world enterprises nationalized or not REP will no doubt continue to pay out on these preferred issuances. World oil production is declining along with the oil price. The spare capacity is not being materially affected. How often do you hear about the Canadian oil sands these days? How much of ENY is in oil sands? I don't believe it is very much as the rotation has moved to O&G. Crude oil has just swung to the opposite side of the mean. Crude may not see $80 a barrel for a few years but +$50 is obviously a near term reality. We see the Motley fool assigning REP 4 stars and MSN rating it an 8 out of 10, 10 being the highest rated.

2009 Feb 22 05:50 PM

[Delojozafado]

Edit "This past Monday" to a Friday.


On Feb 22 05:50 PM Delojozafado wrote:

> I am long the REP-PA. After the drubbing in the market this past
> Monday it now sports a 10% yield. Profits up or down pieces of the
> third world enterprises nationalized or not REP will no doubt continue
> to pay out on these preferred issuances. World oil production is
> declining along with the oil price. The spare capacity is not being
> materially affected. How often do you hear about the Canadian oil
> sands these days? How much of ENY is in oil sands? I don't believe
> it is very much as the rotation has moved to O&G. Crude oil has
> just swung to the opposite side of the mean. Crude may not see $80
> a barrel for a few years but +$50 is obviously a near term reality.
> We see the Motley fool assigning REP 4 stars and MSN rating it an
> 8 out of 10, 10 being the highest rated.

2009 Feb 22 05:51 PM

[Delojozafado]

Cahnah..dah, EH? How 'boot that Storm Exploration for a sleeper? STXPF has been cut in half. The Canadian Superior looks very interesting as well for a long term play. SNG? EH?


On Feb 13 05:29 PM socphd71 wrote:

> I am long Sherritt International. Two-thirds of the company's business
> involves mining nickel and cobalt (cobalt is found with nickel) in
> Cuba. After preliminary refining, it is shipped to Canada for final
> refining. I believe that most is (or was) sold to China. The other
> one-third of the company includes oil wells and refining operations
> in Cuba. Late last month, Cuba nationalized one field in which Sherritt
> was a partner. Before the nationalization, the only buyer for Cuban
> oil (the nationalized Cuban oil company) was behind on its payments
> on Sherritt and its partner, Pebercan.
>
> So beware of the dangers of nationalization should Repsol be successful
> in developing new oil fields.
>
> Sherritt trades under the symbol SHERF.PK in the US and S on the
> Toronto exchange. On Yahoo, ask for S.TO

2009 Feb 22 05:56 PM