Repsol Profit Falls as Output Declines
Repsol YPF SA (REP), Spain’s biggest oil company, said second-quarter earnings fell 7.3 percent as refining margins narrowed and output declined as a result of the civil war in Libya and strikes in Argentina.
Profit adjusted to exclude inventories and one-time items declined to 485 million euros ($696 million) from 523 million euros a year earlier, the Madrid-based company said today in a filing. That beat the 418 million-euro mean estimate in a Bloomberg analyst survey.
“The main factors explaining the decline in earnings from the year-earlier quarter were the output decline in Argentina due to social conflicts, and the suspension of production in Libya,” Repsol said in the statement.
Repsol is investing in exploration in Brazil’s offshore Santos Basin and elsewhere to increase output while seeking to reduce exposure to mature fields in Argentina. Repsol earlier this year suspended its exploration and production operations in Libya, following the uprising in Africa’s third-biggest oil- producing country.
Repsol rose 0.7 percent to 21.83 euros as of 9:03 a.m. in Madrid. The shares have climbed 4.5 percent this year, valuing the company at 26.7 billion euros.
Besides exploration, the company is spending to improve refining margins and new units at its refineries in Bilbao and Cartagena will start operating at the end of 2011. The refining margin indicator for Spain, a measurement of the profit from turning crude into fuels, fell to $2.10 a barrel in the second quarter from $3.30 a year earlier, Repsol said.
Brent oil prices were 50 percent higher in the quarter than a year earlier, Repsol said.
Oil and gas production at Repsol’s upstream division, which doesn’t include the Argentine YPF unit, fell 13 percent from a year earlier to 296,000 barrels of oil equivalent a day in the second quarter.
Output from Buenos Aires-based YPF dropped 20 percent to 446,000 barrels a day, hurt by workers’ strikes. Repsol has been selling part of its stake in YPF and aims to keep at least 51 percent. In 2008 Repsol delayed a public offering of a stake in YPF.
Argentina’s billionaire Eskenazi family earlier this year said it’s paying $1.3 billion to boost its stake in YPF to about 25 percent. The $1.3 billion price was set when the family’s closely held Petersen Group bought about 15 percent of YPF in 2008. The sale reduced Repsol’s stake in YPF to 58 percent.
The Spanish company will consider investing in other upstream assets after reducing its holding in the Argentine unit, Chief Operating Officer Miguel Martinez said in May.
Repsol forecasts annual production growth of as much as 4 percent through 2014 as projects in Brazil and Peru start production. Repsol plans to invest 28 billion euros in the period 2010 to 2014, developing fields in Venezuela, Bolivia and Algeria. It will invest about 6 billion euros this year and its drilling plan for 2011 includes 25 to 30 exploration and evaluation wells, Repsol said in a Feb. 24 presentation.
The Spanish oil company’s reserve replacement ratio rose to 131 percent last year from 94 percent in 2009. Repsol has forecast a ratio of more than 110 percent in the next five years.