Repsol cuts linked to Talisman acquisition

1,500 layoffs worldwide

CALGARY • More layoffs are on the way at Repsol SA, the Spanish company that spent $13 billion to purchase Calgarybased Talisman Energy Inc. this winter and has since been selling assets and reducing staff.

Repsol confirmed Thursday that it’s decision to layoff 1,500 staff, or six per cent of its global workforce, was related to its acquisition of Talisman, a deal that closed in May.

“Repsol said when it acquired Talisman that we would seek to transform our whole organization, using the best from both legacy companies, so this process is part of that worldwide transformation that we are undertaking,” Repsol spokesperson Kristian Rix said in an email.

Repsol management told staff of the 1,500 layoffs in a letter and Rix clarified the job cuts would be spread out over a three-year period.

Rix was unable to say how many people would lose their jobs in Canada, adding the full details of a new plan for Repsol, and its integration of Talisman, would be unveiled on Oct. 15 “and at that time we will be better able to answer more specific asset-related questions.”

The dramatic collapse in oil prices since July 2014, and the commodity’s continued fall in the time since the Repsol’s deal with Talisman closed, played a part in the combined company’s restructuring.

“This is part of a long-term process that is certainly influenced by the current industry context but not motivated solely by it,” Rix said.

When the deal was announced in December, Talisman issued a press release stating “the transaction provides tangible long-term benefits to Alberta and Canada.” The company made two rounds of staff cuts before the deal closed.

Talisman laid off 300 people from its North Sea offshore operations in the U.K. in January, where it is partnered with China’s Sinopec Ltd., citing the collapse in oil prices and high operating costs.

The company also cut about 15 per cent of its Calgary-based head-office jobs in March, putting roughly 200 people out of work.

“It’s a tough week, it’s a tough time for the industry, and the reality is that no oil and gas company is immune

We are quite optimistic that the acquisition of Talisman is going to prove a very good move

to low commodity prices,” Talisman spokesperson Brent Anderson told the Financial Post at the time.

Repsol has been selling off assets to improve its balance sheet following the deal, including two dispositions in the past week.

The company sold its 10 per cent stake in an oil storage and transportation company in Spain, Compania Logistica de Hidrocarburos, for 325 million euros on Sept. 25.

Repsol also announced it sold part of its Spanish natural gas distribution business to a pair of its competitors, Gas Natural Distribucion and Redexis Gas, for 652 million euros on Sept. 30.

RBC Capital Markets analyst Biraj Borkhataria said in a note to clients this week that the market is “clearly concerned” about Repsol’s balance sheet.

“We expect these divestments to ease concerns in the near term, and expect more details on the company’s restructuring plans at the strategy day on Oct. 15,” Borkhataria said.

When Repsol released its second quarter results in July, chief financial officer Miguel Martinez said the company had identified US$350 million in potential cost savings by combining the two companies, up from an initial estimate of US$220 million.

He added that $70 million worth of these “synergies” had already been realized.

Martinez said, “We are quite optimistic that the acquisition of Talisman is going to prove a very good move,” in response to an analyst’s question about whether collapse oil prices would hurt Repsol’s rate of return on Talisman’s assets.