By July 28, 2016 Read More →

Repsol Q2 results better forecasts; untroubled by Brexit


Despite higher-than-expected profits, Repsol stock was down 1.2 per cent after Royal Dutch Shell missed its Q2 forecasts.  Company photo.

Repsol profit helped by higher crude price

 By Amanda Cooper

MADRID, July 28 (Reuters) – Spanish oil refiner Repsol reported a forecast-beating rise in net profit in the second quarter on Thursday, helped by a higher crude price, and said Britain leaving the European Union was not a cause for concern.

Repsol, which operates worldwide, including in the British North Sea, said net profit rose to 345 million euros ($380 million) in the second quarter, from 312 million last year and against forecasts for 330 million.

“We remain committed to our long-term strategic goals and are delivering against our short-term commitments,” Chief Financial Officer Miguel Martinez told an analyst conference call.

Europe’s fifth-largest refiner by market value said lower spending on its crude operations, along with higher production, made up in part for declining refining margins and planned maintenance stoppages at two of its major refineries.

Its shares were down 1.2 percent at 11.52 euros per share, in line with losses in other European oil and gas majors after Royal Dutch Shell missed Q2 forecasts.

Martinez saw no material economic impact from last month’s Brexit vote.

“We will monitor the situation closely and react if any unexpected circumstances arise,” Martinez said.

Repsol’s interests in the North Sea include its holding in operator Talisman, a joint venture with Sinopec, with whom relations have become “increasingly complex and difficult” since its Chinese partner filed a $5.5 billion arbitration case last month, Martinez said.

“Repsol is mindful of the interests of the joint ventures and will continue to honour all the commitments we have undertaken, and we expect Sinopec to do the same,” he said.

Repsol’s heavy debt burden has attracted credit-rating agency scrutiny and it has gone to great lengths, including cost-cutting and divesting assets, to shore up its finances and protect its rating.

Martinez said the company would likely issue up to 1.5 billion euros in hybrid bonds, a pricier form of debt that can be converted into equity, in the fourth quarter of this year, taking advantage of the European Central Bank’s corporate bond-buying spree that has driven interest rates ultra low.

“We are not issuing because of liquidity needs. We are issuing for our need of equity content. That is the point for us. To maintain our investment grade is a must,” Martinez said.

Repsol said it had cut its net debt to 11.7 billion euros by end-June from 11.98 billion at end-March.

Between April and June, the price of a barrel of oil rose by around 30 percent to close to $50 a barrel, following a spate of unplanned global production outages, which in turn eroded refining margins for gasoline or diesel.

Repsol said upstream output rose by 33 percent to 697,000 barrels per day (b/d) from the same period last year, led by ramp-ups at its Latin American fields, Cardon IV and Saipinhoa and the rising contribution of the Gudrun crude oil stream in the North Sea.

(Reporting by Amanda Cooper; Editing by Paul Day and Ruth Pitchford)

Posted in: Energy Financial

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