Repsol Earnings Miss Estimates After Crude Oil Prices Tumble

  • Exploration and production unit reports loss on crude's slump
  • Income from refining and marketing triples on higher margins

Repsol SA reported a 62 percent decline in third-quarter earnings as lower crude prices countered improved refining performance. The shares slumped the most in two weeks.

Adjusted net income fell to 159 million euros ($171 million) from 415 million euros a year earlier, Spain’s largest oil company said Thursday. That missed the average 201.6 million-euro estimate of 18 analysts surveyed by Bloomberg. It reported a net loss of 221 million euros after taking charges at units including gas and power.

Repsol is among international oil producers to suffer from a 40 percent decline in the price of Brent crude over the past year. Like its peers, it has sold assets and cut investments to weather the slowdown as a global supply glut persists. The Madrid-based company has also seen debts mount after acquiring Canada’s Talisman Energy Inc. for $13 billion in May.

The earnings report “confirms our negative view as the group needs to reduce costs heavily to adapt to new oil prices,” Ahmed Ben Salem, a Paris-based analyst at Oddo & Cie SCA, said by phone. Oddo has a reduce rating on Repsol shares with a price estimate of 11.50 euros.

Shares Sink

The stock fell as much as 4.5 percent in Madrid trading, the biggest intraday drop since Oct. 27. The shares were down 2.8 percent at 11.77 euros as of 9:46 a.m. local time, extending their decline this year to 24 percent.

The adjusted net loss in the exploration and production, or upstream, division was 395 million euros compared with a profit of 185 million euros a year earlier. Repsol attributed the loss to low oil prices, higher exploration costs and a lack of production in Libya where political strife and worker protests have curtailed output. Repsol has now halted all output in the North African country, according to Kristian Rix, a spokesman.

Total production surged 79 percent to an average 653,000 barrels a day, with Talisman assets contributing almost half of the volumes, Repsol said in a statement. Output last month averaged 685,000 barrels a day.

Downstream Profit

The refining and marketing, or downstream, unit reported adjusted net income of 682 million euros, more than triple the result a year earlier after refining margins widened. Since the oil-market collapse started in mid-2014, the lower cost of crude has boosted profits for companies with refining operations.

Repsol’s refining margin, a gauge of profitability, jumped to $8.80 a barrel in the third quarter from $3.90 a year earlier, according to an Oct. 14 filing.

Net debt rose to 13.1 billion euros from 1.9 billion euros a year earlier as the company consolidated Talisman’s borrowings onto its balance sheet.

Repsol last month unveiled a five-year plan to sell 6.2 billion euros of assets and reduce investments by as much as 38 percent as it deals with higher debt and the plunge in crude prices. The company announced more than $1 billion in asset sales in the third quarter, part of which was included in the five-year target.

The quarterly net loss reflected one-time provisions in its gas and power unit as well as at non-conventional assets in the Mississippian Lime in the U.S.

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