Adjusted net income
Increase in operating cash flow
Three new renewable energy projects under development
Repsol posted net income of 1.466 billion euros in the first nine months of the year, compared with 2.171 billion in the same period of last year. The year-ago earnings included a capital gain of 344 million posted from the sale, in May 2018, of its stake in Naturgy (formerly Gas Natural SDG, S.A.). In addition, the valuation of the hydrocarbon inventories the company holds was higher between January and September 2018 due to higher crude and gas prices than this year, which represented an effect of 329 million euros.
Adjusted net income, which specifically measures the performance of the company’s businesses, as it excludes the aforementioned effect of the inventory valuation, was 1.637 billion euros, compared with the 1.720 billion achieved between January and September 2018.
Repsol demonstrated its capacity for generating value and adaptation to achieve these results in a context marked by a drop in raw materials prices compared with those recorded in 2018, in a weak environment for refining and with activity in Libya suspended during part of the year.
As regards raw materials, Brent crude averaged 64.6 dollars per barrel between January and September, with a drop of over 10% compared to the average price in the same period in 2018. WTI crude had a 15% lower average price, 57.1 dollars per barrel, while the Henry Hub gas benchmark stood at an average of 2.7 dollars per MBtu, a 7% drop compared with the first nine months of 2018.
In this context, the company has continued to generate value and increased its operating cash flow by 22% over the year, to 4.074 billion euros. In the words of Repsol CEO Josu Jon Imaz, “the robust performance of cash flow, in a weaker market environment, demonstrates the soundness of our strategy.”
This strength of cash flow and of company results led the Board of Directors, in July of this year, to agree to propose to the next General Shareholders’ Meeting an increase of shareholder compensation through the amortization of 5% of the share capital as of December 2018, which will be added to the amortizations carried out in conjunction with the different scrip dividends.
The decision comes on top of the dividend improvement which, with an annualized 8% increase with respect to 2017, will reach 1 euro gross per share in 2020 under the scrip dividend formula and the corresponding buyback to avoid any dilution.
The Upstream business (Exploration and Production) posted a result of 864 million euros in the first nine months of the year, compared with 1.015 billion in 2018, influenced by lower crude and gas prices and the production shutdowns in Libya. The efficiency and digitalization measures established by the company enabled the business to successfully adapt to this context and continue to generate value.
Average production in the first nine months of the year was 702,000 barrels of oil equivalent per day (boe/d), compared with 713,000 boe/d in the same year-ago period. This lower production figure was due to the temporary interruptions of activity in Libya, the maintenance work carried out in Trinidad and Tobago, the disinvestment of Midcontinent (United States) and the expiry of the Jambi Merang license (Indonesia).
During the period, the company obtained new barrels from the connection of wells in Marcellus and Eagle Ford (United States), Duvernay (Canada) and Akacias (Colombia), as well as the acquisition of Mikkel and Visund (Norway).
This comes in addition to the start of production at Buckskin, a significant project in the United States’ Gulf of Mexico, whose output in this initial phase has reached 30,000 barrels of oil per day. Its startup was achieved months earlier than anticipated and with a cost reduction of 40% compared with the original project.
Repsol drilled 17 exploration wells in the first nine months of the year, nine of which were positive. Three are still under evaluation.
A major highlight is the discovery in the Sakakemang block, in Indonesia, considered the largest on-shore discovery worldwide so far this year. This is also the country's largest gas discovery in the last 18 years, and recoverable resources are preliminarily estimated to be at least two trillion cubic feet (TCF), equivalent to two years of consumption in Spain.
The Downstream business (Refining, Chemicals, Mobility, Lubricants, LPG, Trading, Gas Wholesale, and Repsol Electricidad y Gas) achieved a result of 1.087 billion euros, in line with the 1.098 billion posted between January and September last year. The Chemicals, Peru, Trading and Mobility areas showed better performance, whilst the refining unit was influenced by an adverse international climate.
In Refining, the planned shutdowns carried out at the refineries in Bilbao and A Coruna, with a combined investment of 112 million euros, were used to incorporate improvements in technology, energy efficiency and safety. In November, in Puertollano, the company will carry out the last planned shutdown of the year to ensure maximum availability of its facilities once the new international marine fuel (IMO) regulation comes into force, on 1 January 2020, which will benefit Repsol competitively.
The Chemicals unit boosted its earnings thanks mainly to an increase in sales and gains from the efficiency initiatives implemented in the business. In addition, it continued to deploy its differentiation strategy with the launch of new products, such as the polymers for 3D printing and polyolefines obtained from oil from chemically recycled plastic waste.
The Lubricants area advanced its international growth plan after signing, in late September, an agreement to acquire 40% of the United Oil Company lubricants company, which will produce and distribute the Repsol product range in Singapore, Indonesia, Malaysia and Vietnam. This agreement will enable Repsol to increase its presence in Southeast Asia, one of the largest and fastest-growing lubricants markets in the world.
New milestones achieved in the electricity and gas business
As regards electricity generation, Repsol announced, on 1 July, the addition to its portfolio of three new renewable energy projects, two wind and one solar, which, once developed, will represent a combined capacity of approximately 800 MW, with capacity to produce enough electricity for some 650,000 households. When these projects start production, in combination with those of Valdesolar (Badajoz) and WindFloat (Portugal), the installation of which started this month, and its current assets (2,952 MW), Repsol will achieve 90% of its strategic low-emissions generation capacity target of around 4,500 MW in 2025.
The company also continued to add electricity and gas clients, so that it currently has more than 965,000 customers who are benefiting from an attractive and unique offer in the market, with cutting-edge digital solutions and exclusive advantages. Additionally, the electricity sold by the company is certified as 100% low in emissions.
Repsol continued to innovate in mobility, with cuttingedge projects that strengthen the company’s position as a leader on the Iberian Peninsula. In this vein, it opened Spain’s first two ultra-fast charging points for electric vehicles, which will make it possible to recharge vehicle batteries that support its maximum power in five to ten minutes, a time similar to that needed for conventional refueling. One of them, which is located in Ugaldebieta (Biscay), has the most powerful charging station in Europe.
The information included in this document is submitted pursuant to the provisions of article 226 of the Spanish Securities Market Law.
This document contains information and statements or claims that represent estimates or future projections regarding Repsol. These estimates or projections may include statements regarding current plans, objectives and expectations of Repsol and its management, including statements related to trends that affect Repsol’s financial situation, financial ratios, operating results, businesses, strategy, geographic concentration, production volumes and reserves, capital expenditures, costs savings, investments and dividend policies. These estimates or projections may also include assumptions about future conditions of an economic or any other nature, such as future crude oil prices or other prices, refining margins or marketing, or exchange rates. The estimates or future projections are generally identified by the use of terms like “expects”, “anticipates”, “predicts”, “believes”, “estimates”, “assesses” and similar expressions. These statements are not guarantees of future performance, prices, margins, exchange rates or other events, and they are subject to significant risks, uncertainties, changes and other factors that may be beyond Repsol’s control or difficult to foresee. Such risks and uncertainties include the factors and circumstances identified in the filings made by Repsol and its subsidiaries with the Comisión Nacional del Mercado de Valores (CNMV) in Spain and all other supervisory authorities of markets where the securities issued by Repsol and/or its subsidiaries are traded.
Except to the extent that it is required to do so by applicable law, Repsol undertakes no obligation, even when new information is published or in response to new developments, to publicly update or revise any forward-looking statements.
Some of the resources cited do not, as yet, constitute proven reserves and will be recognized as such when they meet the formal criteria established by the “SPE/WPC/AAPG/SPEE/SEG/SPWLA/EAGE Petroleum Resources Management System” (SPE-PRMS) (SPE – Society of Petroleum Engineers).
In October 2015, the European Securities Markets Authority (ESMA) published its Guidelines on Alternative Performance Measures (APMs). The guidelines apply to regulated information published on or after 3 July 2016. The information and breakdowns relative to the APMs used in this press release are included in Annex III “Alternative Performance Measures” of the interim condensed consolidated financial statements corresponding to the period ended 30th of September 2019 and on the Repsol website.
This document does not constitute an offer or invitation to purchase or subscribe shares, in accordance with the provisions of Royal Legislative Decree 4/2015, of 23 October, approving the recast text of the Spanish Securities Market Law and its implementing regulations. Likewise, this document does not constitute an offer to purchase, sell, or exchange, or a request for an offer of purchase, sale or exchange of securities in any other jurisdiction.
The information contained in the document has not been verified or reviewed by Repsol’s External Auditors.