Repsol stock price corrects after dividend is slashed

Repsol stock price corrects after dividend is slashed
Written by:
Michael Harris
November 30, 2020
  • Repsol announced plans to cut its operating expenditure on oil and gas exploration and output by 15%
  • It will also cut dividend payouts for 2021 and 2022 to 0.60 euros per share in cash from 1 euro per share
  • Repsol stock price is down 38% YTD as the fuel sector took a heavy blow after the coronavirus outbreak

Shares of Repsol S.A. (ETR: REP) moved lower at the end of the last week after the energy giant said it plans to reduce shareholder payouts as well as to sell a stake in its lower-carbon unit which slows down the company’s oil and gas output.

Fundamental analysis: Dividend payouts slashed

Repsol said it plans to cut its operating expenditure on oil and gas exploration and output by 15%. It is one of the first fuel companies that pledged to reduce all the emissions from its products. 

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The Spanish fossil fuel company will cut its shareholder payouts for 2021 and 2022 to 0.60 euros per share in cash from 1 euro per share. Repsol said the buybacks could lift returns to more than 1 euro per share by 2025 and added it will not offer the scrip dividend anymore.  

Repsol’s competitors Royal Dutch Shell and British Petrol also reduced their dividends this year, before Shell increased its payouts again in October. 

The company said that 30% of the $22.1 billion investment will be injected into Repsol’s lower carbon businesses, including renewables and biofuel companies, adding to a five-fold surge in renewable generation capacity to 15 gigawatts (GW) in 2030.

Repsol’s CEO Josu Jon Imaz said he planned to sell a stake in the new low-carbon venture to one of the partners or publicly offer the unit’s shares over the following two years. 

“There is no calendar fixed strictly in time, but in 2021, 2022 we will carry out this operation,” Imaz said during a news conference.

Technical analysis: Shares correct lower

Shares of Repsol fell nearly 4% on Thursday, just a day after printing a 5-month high at 8.98 euros. The stock is down 38% year-to-date as the fuel sector took a heavy blow after the coronavirus outbreak.

Repsol stock daily chart (TradingView)

Repsol stock price still closed nearly 10% higher last week on a rebound in risk sentiment. The bulls are now working to push the price action above the 9.00 mark, which offers nearby resistance.

Summary

Spanish fossil fuel company Repsol intends to cut shareholder payouts to 0.60 euros per share from 1 euro per share for 2021 and 2022. The company also plans to sell a stake in its lower-carbon venture as it restricts its oil and gas production.