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Repsol trades at a substantial discount to its SoTP. We explore the undervaluation through the lens of the reported offer by EIG Global Energy Partners to acquire 25% of Repsol''s upstream. Value levers undervalued with a favourable macro environment We believe the market is undervaluing Repsol''s strategic positioning which, relative to peers, is highly exposed to markets we expect to remain tight. Notably its linkage to Henry Hub prices which, in our outlook, remain elevated as LNG volumes continue to fill the European gas sink. It is the most cash flow sensitive peer to European middle distillate product margins and has optimised its refining business to run as hard as possible to extract value from a disrupted supply chain. Moreover, with the sale of 25% of its renewable business, it is better placed to fund an aggressive build out of renewable capacity, reducing risk to shareholders. Trades today with the Industrial cash cow for free! At $50/bbl Repsol trades at a 40% discount to its underlying SoTP, ~60% at $70/bbl. Break out the valuation of its upstream, plus its Marketing and Lubes businesses, and based on where it trades today, you get the rest of its operations for free! An offer has been put on the table - does it crystalise value? In June, news sources reported that EIG had made an unsolicited offer of EUR3.5-4.5bn to acquire 25% of Repsol''s upstream business. We believe the alleged offer is too low, but it does act to expose that private capital, who we typically expect to offer depressed bids to maximise returns, sees quality and value opportunity in Repsol''s upstream portfolio, as do we. Upgrade to Outperform: TP EUR18.5/sh Repsol is generating cash, strengthening its balance sheet and growing shareholder returns. We upgrade to Outperform with a TP at EUR18.5 per share. This reflects its positional exposure relative to the peer group to continued higher commodity and product prices. As well as the value levers it has in place to...
Repsol SA Repsol SA
A strong gain in Industrial, as expected, on the back of the squeeze in refining margins. Repsol passed €1.5bn of impairments related to environmental concerns on its refineries. In our view this is an odd decision as refineries have regained their strategic position in the European energy landscape.
Beats vs consensus for all segments, 2022 buy back increased A EUR2.1bn adjusted net income for 2Q22, was +9% vs expectations and +14% higher than the average annual net income over the past 10 years! The industrial segment produced its highest net income on record, with a refining margin of $23.3/bbl and a utilisation rate of 91%. Repsol expects to continue to hold a significant refining margin premium through 2H22 as it runs refineries as hard as possible and has completed its product slate optimisation. The performance drove strong cash delivery, despite a EUR1.3bn working capital build for product inventories. Subsequently, Repsol updated its buyback guidance, cancelling 150m shares in 2022, previously 125m. Overall, it will cancel ~10% of its share capital in the year with a cash return yield of 10%. Windfall tax - socialisation of earnings does not account for through the cycle returns Josu Jon Imaz (CEO) spoke strongly about how energy companies operate in an unregulated and volatile market, and that Repsol continued to invest in its refineries despite the previous year''s low margins. Therefore, he does not agree that Repsol is currently experiencing a windfall and the Spanish government needs to look through the commodity cycle before taxing companies in an individual year. However, during the call the Spanish government released its proposed two-year levy of 1.2% on sales of energy companies. Looking at the numbers (table below) we currently assume that the levy will increase tax payments in 2023 and 2024 in the range of EUR300-500m. We downgrade our target price by EUR1 reflecting the cash flow impact of the windfall tax in both years. No update on Upstream offer - more expected in October CMD The unsolicited offer from EIG partners for 25% of Repsol''s Upstream remains under-consideration, but no further update was provided, The EUR0.9bn of proceeds from the renewable segment buy-in by Credit Agricole Assurances and Energy...
Waiting on a windfall The headline beat was not the story for Repsol this quarter, excluding the Corporate segment the operating businesses combined missed consensus by -4%. Instead, all focus was on the windfall year its European refining business can expect if distillate markets stay tight. We forecast NW Europe''s Gasoline and Diesel cracks to more than double in 2Q22 and remain tight through the year materially benefiting Repsol as the most levered European Major to refining margins. Reversion in prices will happen, but for 2022 at least, we will see strong cash delivery reducing debt and supporting higher shareholder returns. More cash, more buy backs... simple The message is clear, if the macro sustains and in return generates higher cash delivery, it will buy back more shares. It has accelerated its 50m share acquisition programme, expecting to transact and cancel before the end of the year. Guiding to distributing 25-30% of CFFO to shareholders, the dividend will continue its growth trajectory to EUR0.75 per share by 2025 (+25% vs 2021) and beyond that it''s buybacks. We model that it could acquire an additional 10m shares this year, enabling it to cancel 9% of its share capital in 2022. Renewables, I''m looking for a partner who understands me Toning down the messaging on the partner to join its Renewables business is likely due to a smaller stake than originally considered, and hence lower up-front cash. It describes the ideal candidate as value adding and aligned with its growth strategy of 20GW low carbon operating capacity by 2030. An update is expected in the 2Q results call. Upgrade to Neutral: TP EUR15.5 After updating our model for our latest view of refining margins we realise upside in the share price. However, beyond 2022 we see challenges with reversion in refining margins and an under-invested upstream expected to support an aggressive growth programme in renewable capacity. Repsol is the European refining play of the...
The results were in line with the consensus with an EBITDA CCS up by 4% qoq at €2.45bn. This was led by the Upstream division, with an EBITDA up by 12% qoq at €1.69bn, thanks to a 30% increase in the oil price and 14% in the gas price. The net debt was higher (€5.9bn, +€150m) on a working capital increase of €1.9bn, impacted by the rise in oil/gas prices.
The results are slightly above consensus with an adjusted EBITDA of €2.35bn (+34% qoq), thanks to the Upstream division (EBITDA of €1.5bn, +39% qoq) on higher oil & gas prices (realised gas prices were up 40% qoq), as well as the Industrial division (EBITDA of €577m, +72% qoq) on higher refining margins (+$1.2/bbl at $4.4/bbl) more than offsetting the energy costs. The company guides for an additional share buy-back programme (50mln shares) if macro conditions remain favourable (oil above $70/bbl).
Adjusted net income was slightly above consensus, with gains in Upstream on higher oil and gas prices as well as in the Commercial division, mainly due to higher sales volumes in Mobility. This supports a dividend increase of 5% (to €0.63 per share) and a buy-back programme of 35m shares (c. €400m). All in all, positive results with a distribution that moves ahead of the initial plan (which was guiding for a stable dividend for 2021 and 2022).
In line with prior guidance Following its disappointing trading update of early July Repsol reported Q2 2021 results that were modestly ahead of a previously lowered consensus. As guided, the main area of weakness was in the Upstream which saw a significant reduction in volumes given production issues across several assets, with the company guiding down on its expectations for the full year. Set against this reported numbers elsewhere were if anything better than we had assumed prior to the trading update, not least in Chemicals where Repsol has been able to capture a significant part of the upside from global capacity outages. We modestly downgrade our full year expectations but with the shares trading at the bottom of their recent range and below our target price move the shares to Neutral. Mixed quarter. Decent industrial but disappointing Upstream A somewhat mixed quarter. In the Industrial businesses Chemical strength more than offset the continuing expected weakness in refining markets given another extremely strong quarter for bulk margins. In the commercial business a very healthy margin recovery in Mobility and excellent lubricant results made for a robust performance. Upstream, however, a mixture of unexpected outages, PSC effects and asset sales resulted in the company reducing its full year production guidance to towards 600kboe/d, a c8% downgrade. In fairness to Repsol the sources of the negatives were by and large across non-operated assets not least in Peru (Hunt Oil) and Trinidad (BP) and are expected to have largely unwound by the end of the current quarter. Raise to Neutral despite a modest clip to earnings Away from the traditional businesses the company has raised its expectations for the build out of its renewables pipeline largely following its acquisition of a 40% interest in the US solar development business Hecate. Repsol now guides to over 8GW of capacity in place by 2025. Group capex guidance was also raised by...
All in all, a decent release, with the Industrial division showing stronger results. In Petrochemicals, the company benefits from exceptional margins. The International Petrochemical Margin indicator is up 45% qoq (€1,537/t) and up 74% yoy. In Refining, the margin was also up by $1.3/bbl (to $1.5/bbl), but remains below the group target for FY ($2/bbl). The company believes margins have reached an inflection, with capacity being rationalised. Over the long term, the group expects the European refining capacity to shrink by 45%.
While the higher oil prices show up in the large IOCs’ earnings, the recovery is slower for Repsol, as the refining margins declined qoq in Spain. Management seems to be letting go the idea of selling part of its customer-centric business, perhaps disappointed by the valuations offered, but an IPO of the renewables business is still on the table.
Earnings were above consensus, mainly thanks to lower costs in Upstream. This is a good step as Repsol continues its resilience plan for the next two years. Lower production costs saved €135m on EBIT yoy, as well as €106m on lower exploration costs. Along the same line, the company guides for a capex of around €2.6bn in 2021, which is very low compared to the average of €3.6bn for 2021-25 guided during the capital markets day.
Repsol SA
The company detailed its strategy after the net zero target announced a year ago. While 2021-22 is a focus around the balance sheet, 2023-25 will deliver growth. The dividend is cut to €0.60 per share and the total distribution could go back to €0.90 by 2023. The group sees an EBITDA of €8.2bn in 2025. The latter seems rich, with strong growth expected from customer and low-carbon business while the refining margin is expected to be $5.8/bbl.
Strong net debt performance but uncertainty remains on the key aspects until CMD The market largely shrugged off Thursday''s impressive (but working cap-driven) net debt reduction; net debt should remain below EUR 3.3bn through year end aided by severe opex and capex cuts. Nonetheless, it''s clear the market wants more certainty on key topics: Dividend and Green vs Black strategy; we discuss what to listen for at the 26th Nov CMD below: Dividend expectations? A 50% cut and a modest growth + buyback model looks right to us As we outlined in The greener recovery position we think a 50% dividend cut with plans for modest growth (2-3%/year) fully offset by buybacks would offer an attractive yield (c9.5%) and a more sustainable shareholder returns model. Any ''surplus'' FCF should go to further buybacks. Green, faster: Increasing renewable and circular economy ambitions We think it''s fair to say that Repsol''s green shift has been underappreciated, with a reasonably well underpinned renewable pipeline that should reach ~6GW by 2025 with room for more expansion in core areas (Iberia, Latam in particular), as well as growing customer energy businesses which should combine well with its commercial arm. Circular economy (recycling, waste), biofuels, carbon capture-fuel and hydrogen ambitions should also step up with Spain potentially well-placed to benefit materially from massive increases in low-cost solar driven energy capacity. Management also seem open to potentially spinning off the green business, down the line. Black: Value over volume approach but investors are wary of increasing capex 2020 has required spending cutbacks across the board. While there is some allowance for some increase in oil-linked capex into 2021e as a result, investor appetite is very limited which poses something of a problem for Repsol after a strong set of exploration results during the last 18 months. Asset sales might be preferable, particularly for higher-carbon...
The CFO was up €1bn and the net debt was down by €649m, helped by €316m of proceeds from divestments. The group (only partly) mitigated the depressed refining margins with lower throughput but the outlook remains worrying. Sensibly, the group wants to seize the opportunity offered by the growing biofuels markets and has announced an €188m investment to build an advanced biofuels plant at the Cartagena refinery.
2020 div maintained but financial framework could change within 2021-25 plan Repsol offers the highest dividend yield of the peer group at ~13%, with 2020 maintained through scrip being offset by the cancellation of treasury shares already held. However, when it comes to 2021+ maintaining this level could put financial strain on the company unless commodity prices and margins increase. We see 2021e FCF/div cover at 75% which suggests there is still risk of it being cut given management''s criteria for the dividend to be attractive vs the sector (7.6%) and Spanish index, and should be fully financed by organic cash flow generation (scrip offset via buyback). The market will eagerly await the company''s 2021-25 plans due in November. Continuing green investment but maintaining capex flexibility in the HC businesses The hydrocarbon business continues to show remarkable flexibility on costs/investment with an additional EUR200m announced, giving total costs reduction of EUR1.5bn vs the Feb budget. 2021 capex looks to be cEUR3bn at group level assuming $50/bbl. Flexibility is clearly the mantra for the hydrocarbon businesses, with production and short-cycle development able to come back. Meanwhile the pace of green investment has not slowed with new commitments to generate 1GW in Peru (achieving 6.1GW out of its 7.5GW 2025 target) and green refinery projects underway. Cautious optimism on demand recovery outlook, but downstream margins tempered Today''s 2Q20 results suggest we''re through the worst of the Covid impact, but returning to 2019 demand levels will still take some time (retail demand -13% Y/Y in July). Product inventories are coming down slowly, leaving refining margins at low levels ($1/bbl indicator + $1.8/bl premium). Forward guidance maintains production around the 650kboe/d level whilst refining indicator expectations are lowered to $3.8/bbl (+$0.5/bbl premium) with 77% utilisation reflecting a tough year, while chemicals should be...
Spanish demand for fuels was down 61% yoy in April, but now down by 10-15% in July. The environment is improving, yet still under pressure. The next focus is on Repsol’s new strategic plan. Due in September, it will highlight the environmental targets of the group. More importantly, the new dividend payout will also be announced, dampened by weak refining margins and low natural gas prices.
Decent results, which will help to withstand the foreseeable slump in Q2. Management believes the worst is over in Repsol’s US gas markets and in consumption in Spain with the end of the lockdown. This outlook, combined with the resilience plan led management to maintain the dividend policy.
The additional buy-back announcement has eclipsed the consensus miss, part of which is due to higher exploration costs this quarter. Facing low gas prices, the group is lowering its production forecast for 2020. We reckon this is needed as gas prices in North America might need more than a cold winter before bouncing back up. Lastly, the release did not elaborate further on the energy transition strategy, but will do so in May.
Repsol aims to achieve zero net emissions by 2050. With this announcement, Repsol maintains its leading position in the oil & gas sector on the energy transition. Setting the long-term goal of net zero emissions is an ambitious one, and will leave ESG investors scratching their heads on whether an oil & gas stock can be a green investment.
Positive release, with refining margins and oil prices moving in opposite directions. While it seems like a predictable outcome, the global slowdown weighed on both crude oil and refined products in H1. Nonetheless, middle distillates cracks were up sharply this quarter (perhaps more due to a restrained supply in Europe), as well as gasoline due to seasonal demand. Q4 seems to be strong as well, as proven by the higher margin witnessed in October.
Positive results from the group, which announced a share buy-back programme for c.5% of the capital (c. €1bn). The adjusted net income was 5% above consensus, thanks to a strong result in upstream.
The adjusted net income is down 2% qoq and is slightly above consensus (9%), thanks to the upstream division. The adjusted net income in upstream is up 4% qoq, due to lower exploration costs and partly offset by lower prices (-6% qoq in oil, -11% qoq in gas) and lower production (-3% qoq), while downstream is down 17% qoq, compared to a 15% decline in refining margins.
Q4 results: Adjusted net income: €632m (+7% qoq) • Upstream: €310m (-16% qoq) • Downstream: €485m (+44% qoq) • Corporate & Others: -€163m (€116m in Q3)
In line with expectations, Repsol delivered a rather dull release after the Q3 bonanza from other majors.
• Adjusted net income €1.1bn (+12% yoy) • Production at 722kboe/d • CFO resigns • Guidance maintained
Repsol reported its Q1 18 adjusted results at €616m, only 1% up as expected. By division In the upstream division, the group reported an adjusted net income of €320m, up 43% yoy, mainly due to higher oil & gas prices, but also higher volumes and lower amortisation rates; these effects were partially compensated by higher exploration expenses, the impact of the depreciation of the dollar against the euro and higher taxes as a result of higher operating income. Production reached an average 727kbpd in Q1 18, 33kbpd higher yoy, mainly as a result of the ramp-up of production in Libya. In the downstream division, adjusted net income come down 15% yoy to €425m. The decrease was driven lower margins. Stronger middle distillate spreads were offset by higher energy costs and narrower gasoline spreads. Cash flow The group generated operating cash flow of €919m in Q1 18, enough to cover capex (-€600m) and its dividend (-€196m). Share buy-backs came to €400m and therefore debt increased.
In our view, Repsol reported the best results amongst the big oil companies in Europe. Downstream still accounts for the bulk of the results. Synergies and efficiencies came in 10% above the target for 2017. The group looks to be clearly going for natural gas integration and will probably make some acquisitions in this direction. Portfolio management is likely to be active and we expect further good news to come for investors.
Repsol has finally sold its 20% stake in Gas Natural after rumours started a couple of months ago. The €3.8bn it recieved was slightly lower than expectations. The deal will be closed in six months. The group should book a €400m gain.
Repsol is one of the last European oil companies to report its Q3 17 and, like the others, reported better than expected results even if the beat was a bit shy. Clean net income came in at €576m for Q3 17 vs. €553m expected. Key highlights: - Downstream division accounting for close to 90% of earnings : better results in Trading, higher contribution from the Marketing business and a better performance in the LPG business. - Upstream divisions slightly up, thanks to the increase in the Libyan output and oil prices. - Synergies and Efficiencies target : Year to date, by the end of the third quarter, 80% of the initial full-year target was reached. The group’s net debt at the end of the quarter stood at €6.97bn, €505m lower than at the end of Q2 17, mainly due to the strong cash flow generation from operating activities.
Repsol reported for Q1 17 an adjusted net income of €630m, up 10% yoy and higher than the consensus at €533m. By division: 1) Upstream’s adjusted net income was €224m, nearly doubled compared to a year ago, driven by: a. higher oil prices (+€482m) going from $31/bbl a year ago to $50/bbl in Q1 17; b. lower volumes contributing negatively (despite the resumption of production in Libya). Production reached 693kbpd, 3% down yoy due to disposals. Libya’s resumption in production had an impact of €26m. 2) Downstream’s adjusted net income was €500m, 10% lower yoy due to a decrease in the regulated LPG bottle margin (pricing formula) and sales of the piped LPG segment. Marketing, Trading and gas&power business help to offset this decrease: a. higher refining margins were offset by lower activity due to the planned maintenance at La Coruna and Bilbao, generating a negative effect on the operating income of €25m; b. in chemicals, lower sales generated a negative effect on the operating income of €33m; c. in the Commercial business, marketing and lubricants, operating income came in €45m lower as a result of the lower LPG business because of the fall in regulated LPG bottle margins; d. in Trading and Gas & Power, the operating results were €41m higher. 3) Gas Natural Fenosa’s contribution to Repsol in Q1 17 amounted to €60m, 39% lower yoy due to the lower equity stake since September 2016. Cash flow and debt Cash flow from operations suffered from a €762m working capital movement, leading to a cash flow from operations at only €717m, 25% lower yoy and not enough to cover capex (€760m) and dividend + treasury shares (€300m). As a result, net debt came in at €8.3bn, €200m higher than at the end of 2016 and driven by the increase in working capital. Capex in Upstream is expected to pick up in the remainder of the year and capex guidance for 2017 for the whole company remains unchanged at €3.6bn, of which €2.7bn in Upstream. Synergies and efficiency The group also announced it has made material progress in the synergies and efficiency strategic target, with projects expected to deliver €2.1bn this year, and already €0.5bn realised and booked in the first quarter.
Repsol announced last week an important discovery in US onshore in Alaska. It is the largest oil discovery in US onshore conventional for the last 30 years. The Horseshoe-1 and 1A wells drilled during the 2016-17 winter campaign confirm the Nanushuk play as a significant emerging play in Alaska’s North Slope. The contingent resources identified with the existing data in Repsol and Armstrong Energy’s blocks in the Nanushuk play in Alaska could amount to c.1.2 billion barrels of recoverable light oil. Repsol holds a 25% working interest in the Horseshoe discovery and a 49% working interest in the Pikka Unit. Armstrong holds the remaining working interest and is currently the operator. Preliminary development concepts for Pikka anticipate first production there from 2021, with a potential rate approaching 120,000 barrels of oil per day. The Horseshoe-1 discovery well was drilled to a total depth of 6,000 ft (1,828 metres) and encountered more than 150 ft of net oil pay in several reservoir zones in the Nanushuk section. The Horseshoe-1A sidetrack was drilled to a total depth of 8,215 ft and encountered more than 100 ft of net oil pay in the Nanushuk interval as well.
Shell (RDSA/B LN) (not covered): To farm into shale block in Argentina | Repsol (REP SM) (not covered): 4Q16 results
Repsol reported its Q4 40% above expectations on an adjusted basis. Net income came in at €698m compared to €500m expected. The upstream division reported a gain for the first time since the Talisman acquisition but the surprise come from the Refining division which didn’t suffer like the other oil majors. Higher volumes in Refining, higher margins in Chemicals and higher results in the Commercial businesses were partially offset by lower results in Trading and Gas & Power.
The company report an adjusted net income of €307m vs. €320m expected. By business units: 1) Upstream’s adjusted net income was a loss of €28m, much better than a year ago (€-395m) but lower than the €5m loss expected. Production was up 3%. 2) Downstream’s adjusted net income was €395m, down 42% yoy vs. €385m expected. The lower refining margin decreased operating income by €289m, Chemicals generated a negative effect of €45m in the operating income while Trading’s and Gas&Power’s operating income had a €24m negative impact. The group also benefited from the sale of its stake in Gas Natural. Special items in Q3 16 included a net gain of €180m, mainly due to the sale of a 10% stake in Gas Natural SDG and a partial sale of the piped LPG business offset by the impacts of currency devaluation in Venezuela and rig stand-by costs. The group’s net debt at the end of Q3 16 stood at €9.9bn, €1.7bn lower than in Q2 16 thanks to divestments in the quarter, and good cash flow from operations.
We come back to the Q2 16 results published at the end of July. At that time, as a reminder, the group reported an adjusted net income of €345m for Q2 16, up 11% yoy, perfectly in line with the market’s expectations, but above our own estimates (10% below consensus on cautious synergies and costs). Upstream In the upstream division, adjusted net income was €46m vs a loss of €48m a year ago, mainly due to lower exploration expenses (+€144m), higher volumes (+€290m) thanks to acquired assets and a positive tax effect from the appreciation of local currencies. Lower crude oil had a –€372m impact compared to last year. Average production was 687kbpd, up 33% yoy, due to a full quarter of volumes from acquired assets vs. a partial contribution last year. It was also helped by the ramp-up of Cardon in Venezuela, Sapinhoa in Brazil and the contribution from Gudrun in Norway. Some maintenance work and temporary suspensions due to low prices explained the 2% decrease vs. Q1 16. In terms of production, in Brazil, the hook-up of the FPSO at Lapa (break-even close to $55/bbl) has been concluded and first oil is expected to come one quarter ahead of schedule. In the UK, the rising costs with capex and opex are below plan and production is ahead of schedule. In North America, production at Marcellus has increased yoy, while reducing drilling activity to one rig with a cash break-even close to $2/mmbtu. In Venezuela, the teams are working to solve the issue with the escrow account in order to make the JV work financially. Downstream In downstream, adjusted net income was down 14% yoy to €378m on lower volumes produced, lower margins and maintenance in the refining system (-€224m). On the positive side, Chemicals, Marketing and the LPG businesses improved. The schedule of maintenance stoppages at Cartagena and Tarragona were completed on time and on budget. The planned outages reduced the group’s distillation and conversion utilisation during the quarter. The group achieved an actual refining margin of $0.6, $0.1 over an indicator. The group has completed its major maintenance programme for 2016 and expects its actual margin to recapture the full benefit of its industry-leading facilities in the second half of the year. In Chemicals, sales have again been strong and the margin should remain high for the rest of the year. Spanish motor fuel demand maintained its recovery and the market has grown by 3.6% yoy up to the end of May. Gas Natural Fenosa The adjusted net income at Gas Natural Fenosa stood at €96m, down 9% yoy due to lower profits from gas commercialisation, attributable to the current price environment. Cash flow and debt Cash flow from operations was €1.8bn and covered net investment, interest and dividend payments in the first half of the year. Net debt is slightly down compared to Q1 16, from €12bn to €11.7bn. The group’s liquidity at the end of the H1 16 was €6.7bn including drawdown credit lines which represent 1.8x the coverage of short-term maturities. Change in working capital so far in 2016 is €723m, which also explains the small decrease in debt.
The group reported an adjusted net income of €345m for Q2 16, up 11% yoy, perfectly in line with the market’s expectations. In the upstream division, adjusted net income was €46m vs a loss of €48m a year ago, mainly due to lower exploration expenses, higher volumes thanks to acquired assets and a positive tax effect from the appreciation of local currencies. Production averaged 697kbpd, up 33% yoy. The ramp-up from Cardon IV in Venezuela and Sapinhoa in Brazil, plus Gudrun in Norway and better production in Peru all helped. In the downstream, adjusted net income was down 14% yoy to €378m on lower volumes produced, lower margin and maintenance in the refining system. On the positive side, Chemicals, Marketing and LPG businesses improved. The adjusted net income at Gas Natural Fenosa stood at €96m, down 9% yoy due to lower profits from gas commercialisation. Cash flow from operations was €1.8bn and covered net investment, interest and dividend payment in the first half of the year. Net debt is slightly down compared to Q1 16, from €12bn to €11.7bn.
The group had already discussed its Q4 15 figures at the end of January 2016. Here we bring more colour to the details. Adjusted income in Q4 15 came in at €461m, up 25% yoy, leading to €1.86bn for the full year. Non-recurring was of €2.39bn, largely due to impairments, mostly in the Upstream business (partially offset by a gain from the Talisman bonds amounting to €155m after taxes). By division 1) E&P In the E&P division, the group reported an adjusted net loss of €276m, leading to a loss of €909m for the full-year 2015. Production came in at 697kbpd, up 88% yoy (thanks to Talisman accounting for 318kbpd), with liquids accounting for 35% of the production. Brazilian production was 45kbpd. Libya is still a worry. In January 2016, production averaged 714kbpd. Operating income in the division was -€488m. The factors explaining this yoy performance are: - Lower energy prices: €-307m - Income tax expenses: +€132m (due to lower results) - Exploration expenses: +€89m (lower amortisation and lower seismic expenses) - Higher production: +€11m, despite Libya (-€74m) Operating income of Talisman’s assets was -€208m, and -€115m for the adjusted net income. 2) Downstream In Downstream, the group reported €495m of adjusted income, leading to adjusted net income of €2.15bn for the full year. THe refining margin was $7.3/bbl, compared to $8.8/bbl in Q3 15, but still up on a yoy basis ($5.5/bbl in Q4 14). Enhanced performance in the trading business also helped, even if the effects were partially offset by lower results in the Gas & Power business. The utilisation ratio came in at 89.3%. Operating income in the division was €705m. The factors explaining the operating income yoy performance are: - Higher utilisation and better margin: +€69m - Increased efficiency in chemicals (better international environment): +€65m - FX rate effect: +€71m 3) Gas Natural Fenosa Adjusted net income of Gas Natural Fenosa stood at €123m, 84% higher yoy, mainly due to the contribution of CGE-Chile and the impairment booked in the Q4 14. For the full year, Gas Natural Fenosa’s results came in at €453m. Cash flow Net debt was €11.9bn, down €1bn compared to Q3 15. Cash flow from operations was €2.35bn. The board approved the proposed “Repsol Flexible dividend” programme. With a dividend of €0.3/share and a scrip dividend option, this represents a 40% reduction in the complementary dividend to be paid in June. Overall, this represents a 20% cut in the dividend (at €0.77/share vs. €0.96/share a year ago). Capex is to be reduced to €3.9bn in 2016.
Repsol announced some figures ahead of its official results publication (25/02). The group suffered a net loss of €1.2bn for 2015 after one-off charges of €2.9bn. On an adjusted base, net profit was €1.85bn, 10% above our figures, driven in our view by refining and strong cost cutting on Talisman. Also, the group will reduce capex in 2016 by another 20% to $4bn and increase savings of €1.1bn, of which more than 50% is planned by 2018. Annual savings from the integration of Talisman should be close to $400m, compared with the $220m initially forecast. The company’s Board signed off on the revised strategy at a meeting on Wednesday.
A couple of transactions announced on Friday (11 December) has been done between Statoil and Repsol. Statoil is handing to Repsol a 15% interest in the Gudrun field on the Norwegian Continental Shelf. Statoil remains the operator and largest equity holder with a 36% interest. Pending Repsol's partner approval, Statoil will acquire a 31% equity share in the UK licence for Alfa Sentral, a field which spans the UK-Norway maritime border. And Statoil acquires from Repsol a 13% interest in the Eagle Ford joint venture and becomes its sole operator. In agreement with its licence partners, Statoil will assume operatorship of the BM-C-33 licence in Brazil’s Campos basin, pending approval from the authorities.
+*Repsol reported its Q3 15 results with an adjusted net income of €159m vs. €182m expected.*+ Reported net loss was €-221m, mainly due to non-recurring items within impairments (€443m after tax booked in the Gas & Power division together with the unconventional assets in Mississippian lime). As a positive one-off, there was a capital gain from the sales of CLH and the exploratory licence in Canada. By division, in Q3 15: 1) The Upstream division reported a loss of €395m vs. -€309m expected (Repsol Consensus is available on the company's website). In Q3 15, production was 653kbpd, up 83% yoy thanks to the Talisman acquisition (307kbpd for Q3 15). *Natural Gas accounts for 63% of the group's production.*++ Average sales price of oil was €44.4/bbl, down 47% yoy (nothing new). 2) The Downstream division reported an adjusted net income of €682m vs. €588m expected. Higher utilisation rates and improved refining margins. The refining margin was $8.8/bbl for the quarter. The chemicals division also benefited from a better environment but also from more efficiencies. The division's earnings are split into: 1) refining (€273m), 2) Chemicals (€186m), 3) Marketing and LPG (€24m), and 4) Gas & Power Trading (€65m). 3) Gas Natural Fenosa reported an adjusted net income of €103m vs. €87m, thanks to the contribution of CGE-Chile, despite lower results from gas commercialisation at Latin Marcia. The group's net debt stood at €13.1bn, €141m lower compared to Q2 15.
The company has unveiled its 2016-2020 strategic plan, aimed at guaranteeing Repsol’s strength and its ability to create value even at low oil prices. 1) Short term The company will range between €1.25bn and €1.5bn for 2015. Q3 15 production stood at 651kbpd, up from 526kbpd in Q2 15 but still below the 680kbpd expected. The refining margin was slightly down at $8.8/bbl. from $9.1/bbl. In the next 5 years the group expects a $6.4/bbl. refining margin indicator. 2) Main implementation Repsol will implement a series of initiatives which aim to double EBITDA (at CCS) to €11.5bn by 2020. An ambitious efficiency program will help to achieve an annual €1.5bn in opex savings and synergies. Half of the savings are already under implementation. Additinoal synergies have already been identified with Talisman will will enable Repsol to raise its savings target to €350m from €220m on the deal. The company will divest €6.2bn of non-strategic assets and cut spending by 38%. In 2016/2017 the group will divest €3.1bn of assets. The group announced that it will be able to pay the dividend even if oil prices remain at $50/bbl. The group is free cash flow neutral post dividend at $50/bbl., and E&P FCF break even at $60/bbl. by 2020 from $75/bbl. in 2016 3) Strategy Repsol's E&P division will focus on three strategic regions: North America, Latin America and South East Asia. On the production side, the group aims to produce between 700-750kbpd by 2020.
Repsol said net profit will fall to between €1.25-1.5bn after €450m of provisions after tax this year to account for the lower value of North American gas, power and oil assets. Repsol will present its strategic plan 2016-2020 today. This new plan should also include further cost cutting as Talisman, its latest acquisition (Shale), has put pressure on Repsol's financials. Also, Repsol has reached a complex deal with Armstrong Oil & Gas (Alaskan drilling areas) in exchange for cash and assets. Its production, while up in the third quarter at 651,000 barrels per day from 526,000 barrels per day in the previous three months, was also below a 680,000 barrels per day target announced at the time of the Talisman purchase. Refining margins were down slightly at $8.8/bbl in the three months between July and September from $9.0/bbl in the second quarter.
The company also announced that it plans to eliminate 6% of its workforce by 2020, meaning about 1,500 job cuts (25,000 employees) under a three-year strategic plan for 2016-2020 The move comes as low global oil prices have forced many energy companies around the world to significantly reduce costs. Repsol has sold part of its piped gas business to Gas Natural Distribucion and Redexis Gas for €651.5m with an after-tax capital gain of €367m. The transaction should be closed in H1 16. The announcement came after last week's decision to sell a 10% stake in Spanish oil pipeline operator Compañia Logistica de Hidrocarburos for €325m (€300m gain).
Repsol reported it Q2 15 results which were in line with expectations at €312m vs. €390m a year earlier. By division 1) Upstream's adjusted net income was a loss of €48m. Operating loss was €48m vs. €216m a year ago. Lower crude oil & gas prices had a negative impact of €359m compared to last year and exploration costs impacted the operating income by €128m as a result of the lower amortisation of dry well losses in Q2. 2) Downstream's adjusted net income rose by 171% yoy to €439m. The company's refining margins rose to a new historical high of $8.9/bbl in the first half of the year. This makes the company the sector leader in Europe. 3) Gas Natural Fenosa's adjusted net income came down 34% yoy to €105m due the capital gain generate last year. The contribution of Latin America helped to compensate the lower results of gas commercialisation and power business in Spain. The company closed its $8.3bn acquisition of Canadian oil producer Talisman Energy Inc on 8 May. Following the integration of Talisman's assets, Repsol reached an average production of 660kbpd in June, an 86% yoy increase. Specifically, based on average production in June, the projects in the US and Canada have added 153kbpd and in Asia the volume incorporated is 90kbpd. Repsol's production rose to 526kbpd on average in Q2 from 338kbpd a year earlier. At the bottom line Talisman contributed to a loss of €13m. This new production has to be added to the significant increase in production that Repsol has achieved in Brazil following the connection of the new wells in the Sapinhoá field. Repsol also began production at the giant Perla gas field in Venezuela in early July. This is the largest gas discovery in the history of the company and the largest offshore field in Latin America. Net debt at the end of the quarter was €13.3bn, €200m higher than Q1 15.
