The record exploration campaign continues with 13 discoveries reported in 2009
In an environment marked by the sharp fall in international hydrocarbons prices, refining margins and product demand, Repsol posted net income of 889 million euros in the first half of 2009. This is a 58% decline from the earnings for the first half of the previous year. Excluding inventories, profit fell 55.7% to 771 million euros. Repsol’s operating profit was 1.583 billion euros, 54.8% less than the first half of 2008.
Sharp fall in international prices and demand
During the first half of 2009, oil industry earnings were severely affected by the fall in demand and prices of oil and natural gas. Brent crude averaged $51.7/bbl, 53% less than the $109/bbl recorded in the first half of 2008.
The average Henry Hub price for gas in the first half was $4.2/MBtu compared to $9.5/ MBtu in the year-earlier period, a fall of 55.8%. Refining margins declined 63.2% in the period to $2.5/bbl from $6.8/bbl.
Financial solidity and credit lines of 6.1 billion euros
In the current worldwide financial crisis, Repsol’s financial solidity and its 6.1 billion euros available in credit lines allow the company to forge ahead with its investment plans outlined in the Strategic Plan 2008-2012.
In consonance with the existing economic scenario, the company has put in place a 1.5 billion-euro extraordinary savings plan, representing a budget reduction of more than 10% of what was initially forecast for this year. As well as reducing corporate expenditure, Repsol continues to negotiate with suppliers to adapt existing contracts to the existing macroeconomic conditions.
The company’s net debt at the end of the June was 10.405 billion euros, of which 6.748 billion euros correspond to the consolidation of Gas Natural, following its purchase of Spanish utility Union Fenosa.
In July, the company paid out a complementary dividend of 0.525 euros per share, taking the total gross dividend from 2008 earnings to 1.05 euros per share, a 5% rise from the previous year.
Exploratory record with two of the biggest finds worldwide
In the first half of 2009, Repsol had an unprecedented success in its exploration campaign, reporting a record 13 discoveries of oil and gas, amongst which are two of the world’s ten largest finds this year, Iguazu in Brazil and Buckskin in the Gulf of Mexico.. The discoveries made in the last few years offer a great future potential which will help secure reserve and production growth over the next years.
The recent confirmation in Brazil of hydrocarbons traces in the Vampira well, and the Panoramix, Piracuca and Iguazu discoveries, add to the Carioca and Guara discoveries of 2007 and 2008 and consolidate Brazil’s offshore as one of the world’s most promising areas in terms of reserves.
In the Gulf of Mexico, the company made a new find in the Buckskin well in the first half of the year. The discovery indicates the existence of significant light and sweet oil resources. Additionally, Repsol in March began producing oil and gas from the Shenzi field in the Gulf of Mexico.
In the liquefied natural gas (LNG) business, Repsol began commercial operations at the Canaport LNG terminal in Canada, marking the entrance of the company into the North American gas market.
Upstream (Exploration and Production) operating profit was 325 million euros, a 76% decline when compared to the first half of 2008 as a result of a decline in oil and gas realisation prices from the record highs registered in the first half of 2008.
Combined gas and liquids production fell 1.8% due to contractual changes in Bolivia and Libya of 2008. Excluding the contractual changes and the reduction in OPEC quotas, production grew by 7.4%.
Investment in Exploration and production during the first half rose 35% to 652 million euros.
Sharp fall in refining margins and strength of LPG and marketing
In an environment marked by the fall in demand and declining international refining margins, improved results from the marketing and LPG businesses (butane and propane) partially compensated for the demand and margin decline. Operating income was 565 million euros, compared with 1.125 billion euros in the same period of 2008, representing a fall of 50%.
Regarding the first-half performance, despite the economic crisis and the lower sales volumes that in the year-earlier, Repsol’s downstream business (refining, marketing and chemicals) has begun to show a slight recovery in sales.
Investment in the downstream unit totalled 752 million euros in the first half, destined mainly for the expansion of the refinery in Cartagena and the fuel oil unit in Bilbao.
Improved pump prices in YPF
Operating income at YPF fell 30% in the first half of 2009 to 452 million euros.
Profit declined despite a price increase for gas and service stations, which did not fully compensate for lower income from products sold in Argentina but referenced to international crude prices, export caps and an unfavourable exchange rate.
In July, YPF passed on a new price increase in service stations, increasing gasoline prices 7% and diesel prices by 8%. The government also agreed to raise some of the gas tariffs.
In the first half, production was 599,000 boe/d, a 2.1% decline compared to the year-earlier period. This fall is in line with the natural decline of the maturing fields in the area. Investment in the first half totalled 437 million euros.
Positive impact of the Gas Natural / Unión Fenosa merger
Gas Natural SDG in the fist half of 2009 posted operating income of 334 million euros against 287 million euros in the previous year, a rise of 16%.
The increase in profits included the positive impact of incorporating the results of Union Fenosa in Gas Natural.