Repsol's Results Show 'Resilience'

Spanish producer Repsol on May 5 reported €572mn adjusted net income for the first quarter of 2016, down 38% from €928mn in 1Q 2015.

It acknowledged this included €500mn of exceptional earnings due, mostly it said, to the company’s dollar position after receiving funds from the expropriation of its Argentine subsidiary YPF, subsequently used for the acquisition of Canadian producer Talisman.

Nonetheless both its upstream and downstream earnings improved, which the company said demonstrated the "resilience of Repsol’s businesses despite crude oil and gas prices that are at their lowest point in 12 years." The company stuck to an integrated business model, retaining Spanish refining capacity, whereas others such as larger Shell and BP in recent years significantly reduced their exposure to refining. Repsol also retained a 30% interest in Spanish marketer Gas Natural when its peers were divesting from midstream gas, describing it on one occasion as a natural hedge.

Upstream production reached 714,200 boe/d, double its year-ago level of 355,000 boe/d, because Repsol's Talisman volumes are included in the latest quarter, but not the year-ago one, as the acquisition was finalised only in May 2015. However oil from Repsol’s own field start-ups in Brazil and Venezuela contributed to the production increase.

Net liquids production was 255,000 b/d, up 93%, while net gas was 459,000 boe/d, up 107% - in both cases helped by Talisman’s largely North American volumes. The average gas price realised fell by 17% to $2.35/’000 ft³ ($2.30/mn Btu).

Operating income in 1Q 2016 from Repsol’s downstream was up 4% at €556mn, but low gas prices meant its stake in Spanish marketer Gas Natural was 19% lower at €99mn. Upstream reversed a €190mn loss in 1Q 2015 into a slender €17mn gain in 1Q 2016, despite a 32% fall in the crude oil price realised by Repsol. Many large oil firms reporting over the past week made upstream losses in the first three months of this year.

Mark Smedley