Repsol Earnings Down on Libya Disruptions, Weak Refining Margins

Repsol posted net income of 1.41 billion euros in the first nine months of 2013, calculated at current cost supply (CCS), 17.4% lower than the same period of the previous year. Adjusted net income from continuing operations was 1.572 billion euros, up 9.4% from the year-ago period.

The company said its businesses have performed well despite the negative effect of economic weakness in Europe on refining margins and the temporary production shutdowns in Libya. In this context, Repsol has continued to add production and resources and increasing its exploratory acreage.

The Upstream unit (exploration and production) continued to exhibit a strong performance, adding value to the company. In line with previous quarters, hydrocarbons production maintained its growth through to September to 354,300 barrels of oil equivalent per day (bopd), 8.2% higher than that obtained in the first nine months of 2012.

During the past 12 months, Repsol started up a number of important projects from the 2012-2016 Strategic Plan that have helped increase production: Sapinhoa (Brazil), Sandridge (US), SK (Russia), Lubina and Montanazo (Spain) and the Margarita-Huacaya expansion (Bolivia).

Together with these producing projects, the recent discovery of hydrocarbons in Libya adds to those made in the first half of the year in Alaska, Algeria, Russia, Colombia and Brazil, which have allowed the company to exceed the resourceincorporation goals set for the whole of 2013. In addition, the company has continued its strategy of geographic diversification and growth, acquiring new blocks and operating in new areas such as offshore Eastern Canada or Nicaragua. In the Downstream unit (refining, marketing, trading, chemicals and liquid petroleum), improved earnings from chemicals and LPG partially offset lower refining margins, amid a weak economic environment in Europe, as well and the decline in sales

volumes and margins at forecourts. The company took advantage of a market opportunity in recent months to issue a 1 billion-euro 8-year bond, which was oversubscribed four-fold. This bond issue adds to that of the second quarter, which was issued with the lowest corporate interest rate since the introduction of the euro.

As at 30 September 2013, the Repsol Group (excluding Gas Natural Fenosa) had  liquidity of 6.99 million euros, almost tripling its short-term debt maturities.  During the third quarter, the company has continued to work on the sale of its LNG  (liquefied natural gas) assets to Shell, to be completed, as planned, in the coming  months. As part of this process Repsol in October sold its stake in Bahia de Bizkaia Electricidad (BBE) to BP, as the latter exercised its pre-emptive right over the stake.

Upstream: Production up 8.2%

The Upstream unit’s operating income at the end of the first nine months of 2013 was  1.545 billion euros, 14.2% less than the same period of 2012, mainly due to the  temporary disruptions to production in Libya. Despite this, production reached 354,300 barrels of oil equivalent per day in the first  nine months, 8.2% more than the same period of 2012, due to the start-up of  important projects in Bolivia, Russia, Spain and Brazil, which have made up for lower production in Libya and the sale of producing assets in Ecuador.
Repsol has already begun production of five of the key projects laid out in the Strategic Plan 2012-2016: Lubina and Montanazo (Spain), Sapinhoa (Brazil), MidContinent (United States), AROG (Russia) and Margarita (Bolivia). In addition, the start-up of the Kinteroni project, in Peru is expected in the coming months.At the beginning of 2013, Repsol began producing at the Sapinhoa field in Brazil, which in its first phase will reach an output of 120,000 barrels of oil equivalent per day. The start-up of commercial gas production in the Syskonsyninskoye (SK) field in Russia is also significant in this respect. During the year, Repsol announced new and significant finds including the discovery in block NC115 in Libya, three wells of good quality oil in the North Slope of Alaska and the second gas find in Algeria’s Illizi basin. These finds, together with positive well results in Russia and Brazil, allowed the company to comfortably exceed its annual resource addition target of 300 million barrels of oil equivalent. In line with the strategy of diversifying the company’s portfolio, during 2013 Repsol
acquired new rights over mining domain in Norway, USA, Guyana, Gabon and Indonesia. Repsol’s crude realization price rose 1.1% showing a better performance than Brent
crude (-3.3%) due to the new production mix, weighted toward Brazil and the United States. Gas realization prices increased 8.1% thanks to the start-up of the MargaritaHuacaya expansion project in Bolivia.
Investment in the Upstream unit was 1.709 billion euros, 5% more than during the same period in 2012. Project development investments accounted for 70% of the
total spending, mainly in the United States (36%), Brazil (16%), Venezuela (14%) and Trinidad and Tobago (12%). Exploration Investment represented 25% of the total, spent mainly in the United States (25%), Brazil (17%), Norway (10%) Iraq (10%), Ireland (8%), Canada (8%). The LNG business posted operating income of 610 million euros in the first 9 months
of 2013, a rise of 43.5% compared to the year-earlier period.

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Press Release, November 07, 2013