Repsol Back to Profit, E&P Growth

Repsol said February 23 it made a 2016 net income of €1.74bn ($1.83bn), reversing a loss of €1.4bn in 2015. Adjusted net income at €1.92bn was also slightly higher year on year, significant as €500mn of exceptional financial gains in 2015 related to its sale of its stake in Argentina’s YPF.

The company produced an average of 690,200 barrels of oil equivalent/day last year, 23% more than 2015’s figure of 558,900 boe/d. Repsol said its upstream unit showed “a great capacity to adapt to lower oil prices”, achieving an operating profit of €52mn, which was €977mn greater than in 2015.

This was despite depressed 2016 average prices of $43.7/b for Brent and $2.5/mn Btu for Henry Hub gas. Repsol’s own realised prices were $39/b and $2.40/mn Btu respectively, down 14% on 2015. Total production of 690,200 boe/d split into 2.5bn ft³/d gas, up 27%, and 243,000 b/d liquids, up 18%.

Repsol increased its oil and gas reserves in 2016 to 2.382bn boe, a replacement rate of 103%. It also resumed Libya operations on December 20 (currently 20,000 boe/d) and is now producing from fields A, M, H and north H on block NC-115 and from field I/R straddling blocks 186 and 115.

The company said it exceeded its synergies and efficiencies objective for 2016, achieving more than €1.6bn of savings, or 150% of its initial forecast. In 2017 it will boost this to €2.1bn in savings, bringing forward by a year an objective initially set for 2018. It also reduced net debt by 32% to €8.14bn.

Upstream production in 4Q2016 averaged 679,000 boe/d, 3% lower year‐on‐year, due to less activity and higher maintenance in the US, higher maintenance in Trinidad, UK and Asia, the sale of asset stakes in Trinidad, Indonesia (Tangguh) and the US (Eagle Ford); cessation of production at Varg in Norway partially offset by oil ramp‐ups of Cardon IV in Venezuela and Sapinhoa in Brazil, more production in Peru and the Gudrun asset acquired in Norway. Repsol sold its 3.06% stake in Tangguh for $305.4mn on December 2 last year.

Corporate income in 4Q2016 was €123mn lower year-on-year due to its reduced stake in Spanish utility Gas Natural – it sold down its stake last September from 30% to 20% – while Repsol’s trading/gas & power reported a €75mn fall in income. Unlike the upstream division, the trading floor found that low LNG and gas prices were a challenge.

Mark Smedley