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$55 Per Barrel Is Good For Some

16 December 2014 by lberuti

Since receiving compensation in May for the 2012 nationalization of YPF SA by Argentina, REPSM ( Repsol SA ) has been looking for acquisitions. It was inevitable that with oil down to $55 per barrel some opportunities would arise, as quite a few companies have been put under severe stress. Such was the case of TLM ( Talisman Energy Inc. ) whose 5 year risk premium had blown up since the beginning of September, trading up from 100bps to 500bps, while its stock tumbled from C$10 to C$4. Until a few days ago, TLM’s creditors and shareholders were like most investors in energy companies: very worried. It turned out that acquiring TLM would enable REPSM to replace some of the oil and gas reserves and production capacity it had to give up when it lost YPF. Out of the hundreds of companies and assets around the world REPSM has analysed, TLM was the best match and they decided to launch a $13bln bid. That certainly came as a major relief for TLM’s investors who will recoup most of their recent losses, and REPSM spotted a good opportunity. Most other energy companies are still feeling the heat.