EUR 200.00 For Business Accounts Only

REPSOL: 2019, A YEAR OF PROVISIONS (ANÁLISIS BANCO SABADELL)

REP will make a provision of € 837 M (4.2% market cap and 3.2% T.P.) after the adverse ruling on Talisman UK. BUY.
The provision is linked to the arbitration process initiated by Addax and Sinopec in 2015 after acquiring Talisman UK. Addax and Sinopec requested € 5.09 Bn (26% market cap and 17% T.P. of REP), but considering that the process has a long way to go (1 matter has been settled out of 5) and might not end until 1Q’22, REP assumes in its provision ~16% of the amount from the worst-case scenario. We cut our T.P. by € -3.2% to € 18.40/sh. (+45% upside) to assume this provision, and we highlight the risk of REP cutting the dividend by as much as -50% to absorb it. Today we expect the share price to fall by up to -4%, but if we were to assign the negative scenario a probability of 50%, the drop could reach -13%, and -26% with a 100% probability.