Repsol Indonesia sale price seen in line at best: Report

Spanish oil company Repsol's cash sale of its Indonesian assets is in line with expectations at best, and is still likely to leave the company cash poor, analysts and fund managers said on Friday.

Chinese offshore oil giant CNOOC agreed to buy most of Repsol's Indonesian operations for 662 million euros ($583.3 million), Repsol announced on Friday.

It marked the biggest international expansion to date for CNOOC, and for Repsol is part of its longstanding strategy of selling non-core assets to reduce its 20-billion-euro debt.

Repsol did not reveal what the capital gains on the sale would be, nor did it say how the sale affects its debt to capitalisation ratio. The company aims to cut this ratio -- debt to market cap plus debt -- to 30-35 percent from 46.9 percent at the end of the third quarter.

While Repsol bulls say it is delivering on its promises, others said the deal was not good enough, given that Repsol needs to boost cash flow to cope with mounting problems in Argentina.

``I see it as negative news,'' said Carlos Hernandez, a fund manager at Kutxagest in San Sebastian. ``The company said they wanted to get 700 to 750 million euros, and this doesn't solve their cash flow problem. I would wait to buy until their shares drop some more. They still have a lot of risk in Argentina.''

Repsol shares were down 1.3 percent at 13.65 euros at 1300 GMT, underperforming its European peer group. Before the market opened, Repsol stock was down 15.6 percent for the year.

Repsol bought Argentina's YPF in 1999 for $15 billion, roughly what the whole of Repsol is worth on the stock market today. The economic crisis there and government threats to impose new oil taxes have cut into the stock.

The company put its Indonesian assets up for sale in 1999 in part to finance the YPF buy.

The package sold amounted to 70,300 barrels per day (bdp), of which 79.2 percent was petroleum and liquids and 20.8 percent was gas, Repsol said. One analyst estimated the deal also represented 230 million barrels of proven reserves.

Repsol held onto its Jambi Merang block on Sumatra, currently producing 2,220 bpd but with the potential to produce more based on finds there announced last year.

Analyst Doug Leggate at Commerzbank in London said the deal price was reasonable, given that Repsol had kept Jambi Merang, which he said could be worth another $70 million, and that Repsol had generated an estimated $240 million cash from the assets since they went up for sale.

``To me they're doing OK out of this,'' Leggate said.

``They've talked about three core disposals, and now they've done two of them. To me, they're delivering, although some people choose not to believe it. Argentina is a mess, but that's not management's fault.''

The other two announced disposals, both required under Spanish government liberalisation laws, are for oil distribution company CLH, of which Repsol held a 61 percent stake, and gas distributor Enagas, due to be liberalised this year.

In November Canada's Enbridge agreed to pay 370 million euros ($326 million) for 25 percent of CLH. The next stage of the divestment, which is aimed at reducing Repsol's stake to at most 25 percent, was expected in the first quarter. (*)