Repsol Fourth-Quarter Net Doubles on Libya, Refining Margins

Repsol SA (REP), the Spanish oil producer stripped of its Argentine unit last year, said adjusted fourth- quarter profit more than doubled as Spanish refining margins jumped and production recovered in North Africa.

Profit without one-time items and inventory fluctuations climbed to 517 million euros ($679 million) from 241 million euros a year earlier, the Madrid-based company said today in a statement. That beat the 457 million-euro average of 19 analyst estimates compiled by Bloomberg. Repsol’s refining margin in Spain leaped to $6.30 a barrel from 80 U.S. cents.

Chairman Antonio Brufau last year said the company would boost international production as part of a reshaping plan that included a $4.5 billion-euro divestment target to reduce debt after Argentina seized its YPF unit that held almost half of Repsol’s reserves. The company this week sold assets and said it had already exceeded that divestment target.

“Its exploration and production rates are among the best in their sector, but you are comparing with a very, very weak fourth quarter in 2011,” Nuria Alvarez, an analyst at Renta 4 Brokerage in Madrid, Corp said before results were announced. “This time around it has very high margins in refining and marketing.”

Adjusted operating income doubled as operations resumed in Libya and Bolivia’s Margarita field came into operation, the company said. Repsol reported a reserve replacement ratio of a record 204 percent for 2012, indicating it found more than twice the oil and gas than it produced in the year.

Production for full-year 2012 rose 11 percent to about 332,000 barrels of oil per day thanks to discoveries like Pao de Açucar in Brazil, it said.

Drilling Program

The company plans to drill as many as 40 firm wells this year, according to a presentation to investors in January. Repsol’s is “the best exploration portfolio of the integrated oil and gas companies relative to its size,” Sanford C. Bernstein & Co. analysts said in report e-mailed today.

First production from its Brazil’s Sapinhoa field, one of the largest developed in that country, will help achieve its 10 percent growth target this year along with other project startups, the report said.

Repsol shares gained 0.4 percent in Madrid trading to 16.15 euros as of 3:39 p.m. local time in Madrid. The stock has dropped 17 percent in the past year, the fourth-worst performer of the 13-member Euro Stoxx Oil & Gas Index.

$4.4 Billion Sale

Repsol reduced its net debt by about a half after it agreed to sell $4.4 billion of liquefied natural gas assets to Royal Dutch Shell Plc (RDSA) in a deal announced on Feb. 26 as part of its divestment plan. Efforts to sell the LNG business had extended over seven months due to hurdles such as finding a buyer for an underutilized LNG import hub in Canada. The Canaport terminal was left out of the Shell deal and written down for $1.3 billion.

Canaport is “a business that creates more problems than opportunities,” CEO Antonio Brufau said today in a conference call with analysts. After the writedown “we have left very few room for mistakes,” and the company will evaluate strategic alternatives for this asset, Brufau said.

While Repsol may have exceeded its divestment targets, it may have to consider selling 5 percent of treasury shares or converting 3 billion euros of preference shares to improve its debt position if proceeds from the sale are not “fully utilized” to pay down debt, according to a Feb. 27 Fitch report. Repsol said it plans to use sale proceeds to boost its upstream organic growth strategy.

To contact the reporter on this story: Patricia Laya in Madrid at playa2@bloomberg.net

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

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