Bloomberg News

Repsol Rises Most Since 2010 on Earnings: Madrid Mover

May 10, 2012

May 10 (Bloomberg) -- Repsol YPF SA, the Spanish oil company whose YPF SA unit was expropriated by Argentina, rose the most in two years after its first-quarter earnings beat analysts’ estimates on higher oil and natural-gas prices.

Repsol climbed 8.2 percent to close at 14.21 euros, cutting its year-to-date loss to 40 percent in Madrid. Profit gained 3.5 percent to 792 million euros ($1 billion), compared with analysts’ forecast for 481 million euros, the company said today in a regulatory filing.

Argentina President Christina Fernandez de Kirchner last month seized YPF, which accounted for a fifth of Repsol’s earnings, and accused the company of failing to invest enough in the business to bolster output. Repsol, which also operates in Brazil and the U.S., said first-quarter earnings were driven by stronger exploration and production and a 37 percent gain from the liquefied natural gas unit.

“This is a solid set of results,” said Peter Hutton, a analyst at RBC Capital Markets in London. “Repsol has clearly wanted to show strength in its underlying business. While some may treat the level of beat with some skepticism, it should also be a reminder that the heavily negative sentiment overhanging the stock looks overdone.”

Libyan Wells

Earnings from the upstream division rose 34 percent as production increased in the Gulf of Mexico and Libyan wells resumed production following the country’s civil war. Brent crude averaged $118 a barrel in the first three months of 2012 compared with $105 during the year earlier period.

Without YPF, which saw the price of its oil capped by the Argentine government, Repsol’s net income rose 12 percent to 643 million euros.

“The future of our company has not changed, the upstream division was always the center of our growth,” Chief Financial Officer Miguel Martinez said today on a conference call with analysts. “We may have lost value temporarily, however the potential we have as a company will allow us to recover.”

Repsol will spend about 3.5 billion euros on capital investment this year -- excluding the contribution from its 30 percent stake in Gas Natural SDG SA (GAS) -- as it seeks to increase profit from its production business faster than the industry average, Martinez said. The company plans to drill about 20 more exploratory wells this year and expects to have results from test sites in Cuba and Guyana by June.

Operating income in the LNG business rose to 158 million euros in the first quarter from 115 million euros a year earlier. Income in the refining unit slipped 25 percent to 332 million euros.

Repsol’s net debt at the end of the first quarter excluding YPF and Gas Natural was 4.17 billion euros compared with 4.84 billion euros a year earlier.

The company will present its strategy through 2016 to investors on May 29.

To contact the reporters on this story: Ben Sills in Madrid at bsills@bloomberg.net; Brian Swint in London at bswint@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net


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