Repsol posted net income of 765 million euros in the first quarter of 2011, 11.2% more than the year-earlier period. Excluding extraordinary items, recurring net income improved 23.4%, to 791 million euros.
The 2011 earnings increase is mainly due to improved oil and gas price realization prices, with a 13.4% and 14.8% rise respectively, this was boosted by the solid performance of the liquefied natural gas (LNG) division and the recovery of the chemicals business.
During the first quarter, the group’s operating income increased 4.7% year on year to 1.611 billion euros.
Repsol’s core businesses also experienced significant increases in operating income: Upstream (+13.4%), LNG (+238%) and Downstream (+14.1%), while the operating income of its holdings fell slightly: YPF earnings fell 6.8% and Gas Natural Fenosa declined 3.5%.
Net financial debt, excluding Gas Natural Fenosa, stood at 2.180 billion euros at the end of the first quarter. This implies a net debt to capital employed ratio, excluding Gas Natural Fenosa, of 6.9% at the end of the period.
The Group’s financial strength, with significant cash generation, allows Repsol to undertake the planned investments in productive assets. In the first quarter, EBITDA was 2.518 billion euros, and investments totalled 1.107 billion euros, 43% higher than the same period last year.
So far this year, Repsol has made significant progress in its strategy to divest part of its stake in YPF, aiming to retain a 51% share.
Following the divestments made late last year, during the first quarter of this year an agreement was reached to sell 3.8% to a number of investment funds, and a placement of a further 7.7% stake of YPF capital through a share sale was successfully completed in March. Additionally, The Petersen Group in May announced its decision to exercise an option to buy an additional 10% of YPF, taking its stake to 25.5%.
Repsol aims to sell as much as an additional 3% of YPF to Argentinean minority investors if the market conditions allow it.
UPSTREAM: INCREASED EARNINGS AND INVESTMENT
Operating income for the Upstream Business was 490 million euros in the first quarter of 2011, an increase of 13.4% from the year-earlier period. The increase was a result of higher crude oil and gas realisation prices and lower exploration costs.
Especially significant was the increase in Repsol’s gas realization price, which rose 14.8% compared to a 22.6% decline of the Henry Hub reference price. Repsol’s crude realization price rose 13.4% compared to a 38% increase in Brent crude.
Crude oil and gas realisation price increases had a positive effect of 153 million euros on recurring operating income, while lower exploration costs, the appreciation of the Dollar against the Euro and lower amortization due to decreased production especially in the United States, added 46 million euros to earnings. This compensated the negative impact of lower production, especially in liquids.
Production in the first quarter was 324,348 boed, a decline of 7.4% from the previous year. The fall is explained by circumstantial factors such as the suspension of activity in Libya and maintenance work in Trinidad and Tobago.
Investments in the Upstream unit totalled 437 million euros, a 216.7% increase from the first three months of the previous year. Field development accounted for 36% of total expenditure, mainly in the United States, Venezuela, Bolivia Brazil and Peru. Exploration investment was focused on Brazil and the United States.
