Repsol has decided to provision 837 million euros, charged to the results of 2019 -which will be known next Thursday-, after receiving a partial arbitration award against its dispute with Sinopec for the participation of the Chinese state oil company in Tseuk, a company that operates in the United Kingdom.
As reported this afternoon to the National Securities Market Commission (CNMV), “Although the amount of possible compensation is not known with certainty, if there is, given that the dispute still has a long way and numerous pending decisions ”, in view of the partial award, Repsol,“ prudently ”has endowed this provision.
Repsol explains in the insider information sent to the CNMV that the companies In 2015, Addax and Sinopec initiated an arbitration proceeding against Talisman (currently Rogci) and Talisman Colombia, regarding the purchase materialized by the first in 2012 of 49% of Talisman Energy UK’s shares to the Canadian group Talisman. In said arbitration, relating to events that took place in 2012, before the acquisition of Talisman by Repsol in 2015 – and that does not imply any action taken by Repsol -, Addax and Sinopec requested, in the event that their claims were estimated in full, about 5,500 million US dollars (5,000 million euros) that, according to your requests, would correspond to the amount of your initial investment in Talisman Energy UK and any subsequent investment increases, made or to be made in the future, as well as the opportunity losses that could have occurred.
For its part, On November 30, 2017, Repsol began another arbitration against China Petroleum Corporation and TipTop Luxembourg claiming compensation for the damages that it may suffer as a result of any adverse decision in the arbitration mentioned above, together with other damages not yet quantified. This procedure is based on the conduct, by those, in front of Repsol, during the previous months leading to the acquisition of the Talisman group.
Regarding the procedure initiated by Addax and Sinopec, Repsol informs that In 2017, the arbitral tribunal issued a first partial award rejecting the claims of Addax and Sinopec based on breach of contractual guarantees. Likewise, it decided, among other procedural matters, the bifurcation of the procedure in two phases: in the first one it would decide on responsibility and in the second, on the amount of the responsibilities that, if any, had been determined.
This year, the arbitral tribunal has issued a second partial award on one of the five issues of the liability phase and, although Repsol had considered – based on the external advice that had been provided – and continues to consider that the corresponding claims are unfounded, the court has decided that Rogci and Talisman Colombia are accountable to Sinopec and Addax regarding that matter.
The aforementioned partial award addresses one of the five claims regarding liability. The court has indicated that it will decide the result of the remaining ones in due time, through further awards, although the time at which they will be issued is currently unknown. In principle, once all of them have been decided, a new procedural phase will be necessary to determine the amounts, whose schedule has not yet been established.
The oil company points out that this calendar is likely to include deadlines for new allegations, evidence, additional expert statements and a new oral hearing. It is estimated that the phase related to the determination of the amount, without taking into account any challenges to the awards, will not be resolved before the first quarter of 2022.
The company is analyzing the different actions that fit this partial award and foresees its challenge before the Singapore courts.