UPDATE 1-Cepsa sells upstream assets in Colombia as first quarter loss narrows

(Adds details on earning, divestment in Colombia, windfall tax, CEO comment)

By Pietro Lombardi

MADRID, April 26 (Reuters) - Spain's second-largest oil company Cepsa moved forward with its strategic shift toward low carbon businesses by selling its upstream assets in Colombia while narrowing its first-quarter loss thanks to a strong refining business.

The buyer is Cedco, an affiliate of Colombian oil producer SierraCol, a Cepsa spokesperson said on Friday in an emailed statement, declining to further comment on the deal.

The divestment is in line with the company's strategic shift. Owned by Abu Dhabi fund Mubadala and the Carlyle Group, Cepsa is investing up to 8 billion euros ($8.58 billion) in its shift towards green hydrogen and biofuels.

Last year, it sold its upstream assets in Abu Dhabi.

As a result of this overhaul, earnings from its upstream business declined 77% in the first quarter. However, earnings at its energy division more than doubled on the back of the strong performance of its refining operations.

The quarterly loss narrowed to 8 million euros. In the same period last year, it booked a loss of 297 million euros, dragged by a windfall tax Madrid slapped on Spain's largest energy firms.

As the tax applies only to Spanish operations, it has a bigger impact on locally-focused Cepsa than other Spanish energy giants with larger international operations.

In the first quarter of this year, it paid 122 million euros for the first instalment of the tax.

"Cepsa delivered further key milestones of its transformation journey, underpinned by a strong financial performance when setting aside the continued impact of Spain’s poorly designed extraordinary tax on energy companies," said Chief Executive Maarten Wetselaar, who has been a vocal critic of the levy.

The assets sale in Colombia is subject to regulatory approvals. ($1 = 0.9323 euros) (Reporting by Pietro Lombardi; Editing by Emma Pinedo and Michael Perry)