Repsol YPF 2005 net income rises 29.2% to a record 3,120 million euros

Press Release 24/02/2006 07:00
  • Income growth in all business lines, with 69% increase in Refining
  • Cash flow rises 37.9% to EUR6,500 million
  • Debt is reduced by 16.4%, or by almost EUR900 million 

Repsol YPF reported net income in 2005 was up 29.2% year-on-year to a record EUR3,120 million. The performance was the result of growth in all the companys business lines, producing a 31.5% rise in income from operations to EUR6,161 million.

Cash flow in 2005 rose 37.9% year-on-year, to over EUR6,480 million, confirming both the companys financial strength and large capacity for cash generation, and permitting a 16.4% cutback in debt.

These results were achieved in a scenario of high crude oil prices, with Brent oil averaging a rise of 42.5% year-on-year, as well as the stability of the dollar versus the euro. The companys refining margin indicator reached $8.46 per barrel in 2005, 48.2% above the average for 2004.

16.4% reduction in debt

Repsol YPF net debt at December 2005 was EUR4,513 million, EUR885 million lower than in December 2004. This reduction came mainly from the strong cash flow generated in the period, which was also sufficient to clearly finance the investments made in the year.

The net debt to capitalisation ratio fell to 18.1%, posting a 6.2 percentage point drop with respect to December 2004.

Investments in 2005 were slightly lower year-on-year, at EUR3,713 million, and went mostly to exploration & production (EUR1,948 million) and refining & marketing (EUR995 million).

Business Areas

Exploration & Production: income from operations rises 6%

At EUR3,246 million, income from exploration & production operations in 2005 was 6% higher than the EUR3,062 million posted a year earlier.

This growth was basically driven by the increase in crude oil reference prices and gas selling prices in Trinidad & Tobago and Argentina. 

The Repsol YPF liquids realisation price averaged $37.14 (EUR31.37) per barrel versus $30.85 (EUR24.83) per barrel in 2004. The average price of gas was $1.60 per thousand standard cubic feet (tscf), 24% up on the $1.29 per tscf registered in 2004, shored up by higher average retail prices for gas in Trinidad & Tobago and Argentina.

The companys average oil and gas production in the year, at 1,139,400 boepd, was 2.3% less than in 2004. This decrease was mainly the result of strikes in Argentina (5,700 boepd), scheduled turnovers and operating problems (2,900 boepd), and the effect of high crude oil prices on production sharing contracts (3,600 boepd).

Gas production increased 1.6%, to 608,300 boepd, with enhanced production mostly from Trinidad & Tobago, Bolivia and Venezuela, which offset lower performance from Argentina and Algeria.

Repsol YPF reduced on 26 January proved reserves by 1,254 million barrels of oil equivalent. The negative revisions affected 71% of gas, and are concentrated 52% in Bolivia and 41% in Argentina.

Investments during 2005 in the exploration & production business area rose 64.4% to EUR1,948 million. Investment in development represented 56.5% of total investment, and was spent mainly in Argentina (64.9%), Trinidad & Tobago (8.9%), Venezuela (8.1%), Bolivia (4.5%), Ecuador (3.9%), Brazil (3%) and Libya (1.7%).

Refining & Marketing: income from operations rises 69%

Income from operations in the refining & marketing area, at EUR2,683 million, was up 69.3% year-on-year.

This considerable rise is mainly attributable to the positive performance of refining margins, which rose 48.2%. Marketing margins were similar year-on-year in Spain, but lower in Argentina.

Total oil product sales increased 5.4% over 2004 levels to 57.9 million tons. Sales in Spain were 1.8% up year-on-year, and in Argentina, Brazil and Bolivia (ABB) rose 4.9%. In the rest of the world, oil product sales showed a 23.7% growth, reaching 8.4 million tons. Sales to our own marketing network were higher in Spain, ABB and the rest of the world.

Turning to the LPG business, total sales reached 3.3 million tons, showing a 3.9% rise from 2004. In Europe there was 2.9% sales growth thanks to larger volumes in Portugal which compensated for a 1.7% drop in Spain. In Latin America, sales were 5.2% higher year-on-year shored up by strong growth in Ecuador (9.4%) and Peru (8.3%).

In 2005, investments in refining & marketing were EUR995 million, and were mainly allotted to current refining projects and the acquisition of LPG assets in Portugal.

Chemicals: income from operations rises 18%

In Chemicals, income from operations improved 17.6% year-on-year to EUR308 million, versus EUR262 million a year earlier. Strong performance here came from wider international margins on our product mix and the income contribution from the Sines complex acquired in Portugal.

Total petrochemical product sales reached 4.64 million tons, 13.3% more than in 2004.

Investments in Chemicals totalled EUR170 million versus EUR292 million in 2004, and were mainly spent on increasing capacity, particularly at the propylene oxide/styrene plant in Tarragona, and in upgrading existing units.

Gas & Power: income from operations rises 25.5%

Income from Gas & Power operations in 2005 rose 25.5% to EUR389 million, versus the EUR310 million posted in 2004.

There was improvement in gas distribution in Spain and also in Latin America, where performance was boosted by organic operating growth in Mexico, Colombia, and Brazil.

2005 investment in gas & power amounted to EUR457 million versus EUR777 million the year before.

Annex

Highlights

We would like to highlight the following events that have arisen to date, in 2005:

  • In February 2005, Repsol YPF entered an agreement with the Dutch company, Basell, to acquire 50% of the latters stake in Transformadora de Propileno A.I.E., including a polypropylene plant at the Tarragona Petrochemical Complex, with a 160,000 tons/year capacity, in which Repsol already holds the other 50%. This transaction boosts Repsol YPFs polypropylene capacity by 15%, thus increasing its presence in the polyolefin business in Europe, and represents another step forward in one of the companys core strategic lines for growth.
  • In Venezuela, last March, Antonio Brufau, Chairman of Repsol YPF, and Rafael Ramírez, Venezuelan Minister of Energy and Mines, entered a series of strategic agreements that will increase our companys presence in the region. The first of these agreements contemplates the creation of a mixed company between PDVSA (51%) and Repsol YPF (49%), the first of this nature to be set up in Venezuela, that would hold the rights for oil and gas exploration and development in the areas in which operations are currently underway (Mene Grande, Quiriquire and Quiamare- la Ceiba) and in new neighbouring areas.
  • Another of the agreements will permit Termobarrancas (a Repsol YPF affiliate in Venezuela) to start up and operate a thermal power generation plant in the state of Barinas. By virtue of this contract, PDVSA will acquire from Repsol YPF electricity blocks of up to 300 megawatts per hour. Early production at this plant began in the last quarter of 2005 with a production of 80 megawatts. The gas to feed the plant is supplied from the fields that Repsol YPF has in the Barrancas area.
  • Also in March, Repsol YPFs Chairman and Chief Executive Officer, Antonio Brufau, and ChevronTexacos Chairman and Chief Executive Officer, Dave OReilly, signed in Caracas a Letter of Intent proposing to the Ministry of Energy and Petroleum and the national oil company of Venezuela, PDVSA, the joint development of an exploration block in the prolific Orinoco Belt and the construction of a refinery for transformation of the crude oil produced there.
  • Repsol YPF and Gas Natural SDG, on 29 April, entered an agreement for the Liquefied Natural Gas (LNG) businesses, including the exploration, production, and liquefaction of natural gas reserves. This agreement will grant both companies access to new markets under more favourable conditions. In the exploration, production, and liquefaction (upstream) area is contemplated an association for the development of new ventures in which Repsol YPF will be operator with a 60% stake in assets, and Gas Natural SDG will hold the remaining 40%.
  • On 7 June, Repsol YPF and Irving Oil Limited entered an agreement to develop the first LNG regasification plant on the east coast of Canada, forming a new company, Canaport LNG, which will construct and operate the terminal to supply markets in the surrounding area, as well as the northeast coast of the United States. The Canaport terminal will initially be capable of putting 10 Bcm per year of LNG on the market. Repsol YPF will supply the natural gas to feed the terminal and hold a contract for 100% of the plants regasification capacity. This plant is scheduled to go on stream and distribute natural gas to the market from 2008 onwards, and Repsol YPF will market the regasified LNG mostly in the USA.
  • Also in June, Repsol YPF signed a Memorandum of Understanding with Hunt Oil to develop the Peru LNG project. This project consists of a Hunt Oil and SK Corporation joint venture for building and operating a liquefaction plant in Pampa Melchorita (Peru). The plant, expected to be operational in 2009, will produce 4 million tons per year of LNG for sale on the West Coast of the United States and Central America. The Peru LNG project will be fed by natural gas from blocks 88 and 56 of the Camisea field, in which Repsol YPF also has a stake. This MOU also contemplates Repsol YPF taking a stake in Transportadora de Gas del Peru SA (TGP), the company that delivers natural gas from the Camisea area via the trans-Andean pipeline.
  • Repsol YPF will invest $130 million in the start-up of the Neptune field, in deep waters of the Gulf of Mexico, in which the company holds a 15% stake. The Neptune field will have a maximum production of 50,000 barrels of oil per day and 50 million cubic feet of gas. The total cost estimated for this development is some $850 million, and its reserves are calculated at between 100 and 150 million barrels of oil equivalent (boe). The field is expected to go into production towards the end of 2007.
  • In July, Repsol YPF became one of the main oil and gas producers in the Caribbean on exercising a call option for the purchase from BP of three oil fields and one gas field in Trinidad & Tobago, for a price of $229 million. The three oil fields, Teak, Samaan and Poui, currently produce 20,500 barrels of oil equivalent per day. Investment in the oil fields and the development of the gas field will be around $500 million up to the year 2025.
  • Fruit of an agreement with Gas Natural SDG, in August, Repsol-Gas Natural LNG, S.L, a 50-50 joint venture, was set up for the transport, trading and wholesale of LNG. This new company is the third largest in the world in terms of LNG handled, immediately behind KOGAS and Tokyo Electric.
  • In November, the company presented a new refining investment programme for the Downstream area. Repsol YPFs refining strategy in Spain is focused on increasing the distillation and conversion capacity to reduce the deficit in gas oil; adapting the units to future product specifications; encouraging the use of bio-fuels, and improving our performance in energy efficiency, safety and the environment. To this end, the company will inject EUR3,870 million, of which EUR 2,100 million will be earmarked for the Cartagena refinery to increase its refining and conversion capacity, and EUR900 million for the Bilbao refinery to reduce fuel oil production and upgrade product quality, with special emphasis on environmental improvements.
  • At its annual summit in November 2005, the Centre for Financial Stability (CEF in Spanish) declared YPF S.A. to be the company with the highest degree of Corporate Governance in Argentina in 2004. Good corporate governance practices are increasingly valued by the capital markets, and for several years now Repsol YPF has strived to be at the forefront of these practices in all the countries in which it operates.
  • In Argentina, Repsol YPF announced a planned investment of $30 million in the construction of a plant in Ensenada (due to begin in 2006) for the production of 100,000 tons of Bio-diesel per year, using cutting-edge technology. This new product is developed via a suitable combination of traditional gasoil and the energy value obtained from vegetable oils (such as soy, rapeseed and sunflower oil, etc).
  • Repsol YPF in December put on stream the largest liquefaction plant in the world, with the start of production from the fourth train at the Atlantic LNG plant in Trinidad & Tobago, in which it holds a 22% stake. This plant will have a production capacity of 5.2 million tons per annum of liquefied natural gas.
  • The Repsol YPF Board of Directors, on 29 December 2005 and in accordance with a proposal by the Nomination and Compensation Committee, approved the appointment as independent directors of energy experts, Philippe Reichstul and Paulina Beato, who took up the vacancies left several months before by the exit of the two BBVA domanial directors. These appointments are pending ratification at the companys AGM.
  • At that same meeting, the Board of Directors approved payment of a EUR0.30 per share interim dividend against the 2005 financial year, which is a 20% increase year-on-year, effective to shareholders as of 12 January 2006 last.
  • Moving on to 2006, in Libya, Repsol YPF made a new discovery of high-quality light crude oil at the NC 186 block in the Murzuq Basin. Tests at the well gave a preliminary production estimate of 2,300 barrels of oil equivalent per day. This discovery, in the Sahara desert, 800 km. south of Tripoli, is near the two latest finds made by Repsol YPF in this same block towards the end of last year, which gave a preliminary production of 2,060 and 4,650 barrels per day, respectively.
  • In February, Repsol YPF and West Siberian Resources (WSR) signed a strategic agreement whereby Repsol YPF not only acquires a 10% stake in the latter via a WSR capital increase, involving an investment of nearly $90 million, but will also develop projects in the exploration and production of oil and gas in Russia, where WSR owns exploration assets. This deal strengthens Repsol YPFs exploration and production (Upstream) business and marks progress in the companys strategy of geographical diversification. This alliance with WSR also represents a good opportunity to participate in the Russian market with a view to analyzing other projects in the region. 
  • The company is opening an office in Moscow to attend to its growing presence in Russia, progress in new projects and take quicker and more efficient advantage of the opportunities offered by the Russian oil industry.

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