OilVoice - Repsol Announces 2009 Full Year Results

Repsol Announces 2009 Full Year Results

Friday, February 26, 2010

Repsol posted net income of 1.559 billion euros in 2009, a 39% decline from the previous year, due to the sharp fall in the international oil and gas prices and a dramatic contraction of economic activity.

Highlights
• Operating income fell 35.4% to 3.244 billion euros.
• Oil production at the Upstream (exploration and production) unit was 4.9% higher compared to 2008, due to the start of production at the Shenzi field in the deepwater area of the Gulf of Mexico.
• Repsol's Upstream reserve-replacement ratio was 94% from 65% in 2008.
• During 2009, the company carried out a record exploration campaign with 15 finds, three of which are amongst the world's biggest discoveries.
• Improvement in marketing had a positive impact on the Downstream unit's results, partly compensating for the effects of the fall in worldwide demand and weak international refining margins.
• Revenue in 2009 was 49,032 million euros.

Repsol's operating income was 3.244 billion euros, 35.4% less than 2008, and was severely affected by the fall in oil and gas prices, and low refining margins in Spain.

Throughout 2009, Brent crude averaged $61.7/bbl, 36.6% less than the $97.3/bbl recorded in 2008. West Texas averaged $62.1/bbl, a fall of 37.8% when compared with $99.8/ bbl in the same period of the previous year. The average Henry Hub price for gas during 2009 was $4.0/MBtu compared with $9.0/MBtu in the previous year, a fall of 55.6%. Refining margins in Spain declined 82.4% in the period to $1.3/bbl.

Of the company's core business, the Exploration and Production unit (Upstream) operating income posted profit of 781 million euros, a fall of 65.4% compared to the previous year. Profit at the Refining, Marketing, LPG and Chemicals (Downstream) businesses was1.022 billion euros, a 2.5% fall year-on-year.

The company reported cost savings of 800 million euros on a homogenous basis, while investments fell (during the 2008-2012 period) by 3.9 billion euros, from 28.9 billion to 25 billion euros.

Investments, excluding Gas Natural, totalled 3.943 billion euros in 2009, helping ensure the company's organic growth.

Moreover, Repsol has liquidity of more than 5.5 billion euros and a net debt to employed capital ratio of 16.7% for the Group, excluding Gas Natural.

Upstream: Reserve Replacement Ratio Reaches 94%
Operating income reached 781 million euros in 2009, a fall 65.4% from 2008, mainly due to declining international crude oil (-36.6%) and gas (-55.6%) prices. In the second half of the year prices recovered somewhat from those registered at the end of June.

In 2009, production in the Upstream unit averaged 334,000 boed, 0.3% more than the previous year despite contractual changes. The increase in liquids production is especially significant with a 4.9% increase to 134,000 boed.

During 2009, this trend was boosted with 15 significant discoveries, that will add 550 million boe of contingent resources and unlock further potential in the coming years.

Repsol last year carried the most successful exploratory campaign of its history. Of the company's 15 reported discoveries, Abare West in Brazil, Buckskin in the United States and Perla 1X in Venezuela are amongst the top ten offshore finds in the world in 2009

Repsol's reserve replacement ratio increased to 94% from 65 % in 2008, a result of discoveries made during previous years. During 2010, Repsol expects the upstream reserves replacement ratio to exceed 100%.

In spite of the difficult financial environment, upstream investments totalled 1.122 billion euros. This is in line with the spending of the previous year, which aims to guarantee the company's future.

Of total investments, 42% was spent on developing fields in the United States (41%), Trinidad and Tobago (22%) and Libya (10%). Investments in exploration represented 48% of the total, and were mostly dedicated to Brazil (33%), Spain (18%), United States (16%) and Algeria (14%).

Discoveries
During 2009, Repsol had an unprecedented success in its exploration campaign, reporting a record 15 oil and gas discoveries. Amongst these, Abare West in Brasil, Buckskin in the United States and Perla 1X in Venezuela are amongst the top ten offshore finds in the world in 2009, including Repsol's biggest-ever gas discovery.

In the second half of 2009 Repsol made new oil and gas discoveries in the BM-S-9 block in Brazil's deep water Santos Basin in the Abare West well, also among the top ten offshore finds in the world in 2009, adding to the Vampira, Panoramix, Piracuca and Iguazu discoveries announced in the first half of the year.

Also in Brazil, Repsol confirmed the significant potential of the Guara well after initial production tests, resulted in an estimate of recoverable volumes of light crude and gas of between 1.1 billion and 2 billion barrels of oil equivalent. Due to the field's potential, the consortium will install a Floating Production, Storage and Offloading vessel (FPSO) to produce 120,000 boe/d, which would make it the second producing field in the Santos Basin.

In Venezuela, Repsol has confirmed its biggest ever gas discovery. The field is estimated to contain recoverable gas volumes of between 1 and 1.4 billion barrels of oil equivalent. Perla 1X is also one of the world's top ten offshore finds in 2009.

In the Gulf of Mexico (Unites States), the company made a new find in the Buckskin well, also in the world top ten, in the first half of the year. This adds to the new finds in the Shenzi fields in the G109 and Shenzi-8 fields that indicate important oil resources. Oil production in the Shenzi field has beaten initial expectations by 20%.

Also in September, Repsol announced the discovery of hydrocarbons offshore Sierra Leone, demonstrating the potential of a previously unexplored area.

Downstream
Downstream operating income was 1.022 billion euros, 2.5% less than the previous year, due to the sharp fall in refining margins from 7.4 dollars per barrel in 2008 to 1.3 dollars per barrel in 2009. The value of inventories and the improved performance of the marketing business helped partially offset the narrower refining margins.

During 2009, investments in Downstream totalled 1.649 billion euros, and where mainly assigned to the expansion and conversion projects in progress at the Cartagena and Bilbao refineries. The expansion of the Cartagena refinery will improve the refining margin by approximately 5 dollars per barrel.

Both refineries will increase their production capacity of middle distillates, mainly diesel, helping reduce Spanish imports of this fuel.

During 2009, the petrochemicals margins remained exceptionally narrow, however product sales improved 24% in the fourth quarter, indicating a recovery for 2010.

YPF
Operating income at YPF was 1.021 billion euros, 11.9% less than 2008. An increase in domestic prices, the Petroleum Plus programme and the savings plan partially offset lower income from products sold in Argentina but referenced to international prices, as well as lower revenues from exports and low gas prices.

In the fourth quarter, the YPF increased fuel prices that, added to the increased income from exports and from products sold in the domestic market but referenced to international prices, contributed to a 216.8% improvement is YPF's operating income compared with the year-earlier period.

In 2009, YPF investments were 956 billion euros, of which 66.8% was spent on exploration and production projects.