OilVoice - Repsol Posts Net Income of 1.257 Billion Euros

Repsol Posts Net Income of 1.257 Billion Euros

Thursday, November 12, 2009

• In line with the rest of the industry, net income fell 55.4%, due to the sharp decline in international oil (-49%) and gas prices (-60%) and Spanish refining margins (-74.3%).
• The company’s operating income registered an improvement compared to the previous quarter, a reflection of a slightly improved economic situation.
• The company has carried out a record exploration campaign during 2009 with 15 finds, including 2 in Brazil and Venezuela which are amongst the world’s biggest discoveries.
• During October, the potential of the Shenzi field in the deepwater Gulf of Mexico (United States) was confirmed, with current production above 120,000 barrels per day representing 20% more than initial expectations.

Repsol Chairman Antonio Brufau said "the recent discoveries constitute a great value potential for the company and consolidate the transformation of its business structure."

Repsol posted net income of 1.257 billion euros during the first 9 months of 2009, in an environment severely affected by the fall of oil and natural gas prices. Net income fell 55.4% compared to the same period in 2008, in line with the rest of the industry.

Repsol’s operating income was 2.484 billion euros, 51% less than in the first nine months of 2008. Nevertheless, during the third quarter of 2009 operating income experienced a slight improvement compared to the previous quarter, a reflection of the signs of recovery in the economic environment.

SHARP FALL IN INTERNATIONAL OIL AND GAS PRICES

During the first 9 months the year, oil industry earnings have been severely affected by the fall in demand and prices of oil and natural gas, as well as by production restrictions imposed by OPEC and the sharp fall in Spanish refining margins.

Brent crude averaged $57.3/bbl, 48.4% less than the $111.1/bbl recorded in the first 9 months of 2008. West Texas averaged $57.3/bbl, compared with $113.5/ bbl in the same period of the previous year, a fall of 49.5%. The average Henry Hub price for gas in the first 9 months of 2009 was $3.9/MBtu compared to $9.7/MBtu in the previous year, a fall of 59.8%. Refining margins in Spain declined 74.3% in the period from $7/bbl to $1.8/bbl.

FINANCIAL SITUATION AND DEBT

The company’s 1.5 billion-euro extraordinary savings plan developed in response to the current economic environment is being implemented successfully. As well as reducing corporate expenditure and freezing the Chairman, Board and executives’ salaries, Repsol continues to negotiate with suppliers to adapt existing contracts to the existing macroeconomic conditions.

The company’s net debt at the end of September 2009 was 10.575 billion euros, meaning a rise of 170 million euros compared to the previous quarter, even though the company paid a final dividend for 2008 of 641 million euros. The net debt-to-capital employed ratio stood at 29.6% at the end of the quarter.
Without including the consolidation of Gas Natural, the company’s net debt was 4.062 billion euros at the end of the third quarter, with a net debt-to-capital employed ratio of 14.2%.

PRODUCTION POTENTIAL CONFIRMED IN BRAZIL, VENEZUELA AND THE USA

During 2009, Repsol had an unprecedented success in its exploration campaign, reporting a record 15 oil and gas discoveries, including its biggest ever gas discovery in Venezuela. Because of these activities, Repsol has incorporated great volumes of resources that will help reserves and production growth over the next years.

Since the announcement of the first half 2009 earnings, Repsol has made discoveries in West Abare in Brazil, Perla 1X in Venezuela, and Venus B-1 in Sierra Leone.

In Brazil in block BM-S-9 of Brazil’s deep water Santos Basin, Repsol made a new oil and gas discovery (well Abare West), which adds to those of the Vampira well, and the Panoramix, Piracuca and Iguazu discoveries, announced in the first half of 2009.

Also in Brazil, initial production tests in the Guara well in Brazil’s Santos Basin have been completed, giving estimations of recoverable volumes of light crude and gas at 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 and the largest find of its kind made in that country. The field contains recoverable gas volumes of between 1 and 1.4 billion barrels of oil equivalent.

In the Gulf of Mexico (USA), the company made a new find in the Buckskin well 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, a discovery in Block SL 6/07 was made in the Venus B-1 well in Sierra Leone, indicating the potential of the previously unexplored area.

Upstream (Exploration and Production) operating income for the first 9 months of the year reached 618 million euros, representing a fall of 69.1% compared to the same period first half of 2008, mainly because of a sharp decline in oil and gas prices from the record highs registered in 2008.

Total hydrocarbons production was 328,297 of barrels of oil equivalent per day compared to 333,540 in the same period of the previous year, a 1.6% decline, due to the fall in demand in Venezuela and Brazil and a programmed maintenance stop in a gas plant in Algeria. When corrected for regulatory and contractual changes, and for the production restrictions imposed by OPEC, output would have increased 4.8% thanks the start of production in Shenzi.

During the first 9 months of 2009, investment in exploration and production increased by 9.8% to 942 million euros. Development funds were assigned mainly to the USA, Trinidad & Tobago and Libya.

In the first 9 months of the year, the liquefied natural gas (LNG) business posted operating income of 39 million euros compared to 88 million euros of the same period of the previous year, representing a 55.7% decline. This fall is due to the lower international gas prices and the Spanish electricity pool prices, as well as lower marketing margins and volumes. Investments of this period reached 103 million euros and were assigned mainly to the Canaport LNG plant.

SHARP FALL IN REFINING MARGINS

Downstream operating income in the first 9 months of the year was 766 million euros compared to 1.540 billion euros during the same period of previous year, representing a 50.3% fall due to a decline in refining margins and the accounting effect of the cost of inventories.

The savings plan implemented by the company has reduced fixed costs in refining and helped compensate for the effects of weak refining margins in 2009. Additionally, the good results from the LPG and Marketing business during the third quarter have contributed positively to this business results.

Investment in the Downstream unit was 1.209 billion euros, mainly assigned to projects in progress in Cartagena and Bilbao.

IMPROVED REALISATION PRICES IN YPF

In the first 9 months of 2009, the operating income at YPF fell 36.6% to 663 million euros.

Profit declined despite a price increase for gas and service stations products, which did not fully compensate for lower demand nor for lower revenue from products sold in Argentina but referenced to international crude prices, export caps and an unfavourable exchange rate.

During the period, YPF production was 587,980 boe/d a 5.6% decline compared to the same period of last year, in line with the natural decline of maturing fields typical of these areas, and a workers strike in the third quarter. Investments of 618 million euros were mainly assigned to developing, exploration and production projects.

POSITIVE IMPACT OF THE GAS NATURAL-UNION FENOSA MERGER

Gas Natural SDG in the first nine months of 2009 posted an operating income of 560 million euros against 423 million euros in the same period of previous year, a rise of 32.4%.

The increase in profits included the positive impact of incorporating the results of Union Fenosa in Gas Natural.

The 4,840 million euros invested by Gas Natural was mainly used to increase that company’s participation in Union Fenosa, as well as electricity generation and distribution activities.