Repsol First-Quarter Profit Gains on Brazil’s Sapinhoa, Refining

Repsol SA, the Spanish oil producer that lost a third of its value last year, said first-quarter earnings beat estimates as refining margins widened and production ramped up in Brazil.

Profit climbed 38 percent to 634 million euros ($834 million) from 458 million euros a year earlier, the Madrid based company said today in a statement, beating a 540 million-euro mean estimate in a Bloomberg survey of analysts. Repsol’s results reflect continuing operations and strip out its former Argentine unit YPF SA, seized in April of 2012.

First production from its Brazilian Sapinhoa field, one of the largest in the country, as well as higher contributions from Bolivia’s Margarita field and the Russian SK field, bolstered production 11 percent to 360,300 barrels per day in the first quarter. The company reported seven out of nine wells drilled in the first quarter were successful.

Repsol’s refining margin in Spain jumped to $3.90 a barrel from $3 a year earlier. The Spanish driller can generate an additional 200 million euros in earnings before interest and tax for each dollar per barrel added in refining margins, RBC energy analyst Peter Hutton estimates.

The shares gained as much as 1.9 percent to 18.55 euros in Madrid trading, the highest in a year. The stock has rebounded 20 percent this year.

“With an impressive track record on divestments, the focus of attention has turned back to upstream and the diversified exploration portfolio,” BPI analysts said in a report.

LNG Earnings

Repsol said its liquefied natural gas division, most of which it sold to Royal Dutch Shell Plc in February for $4.4 billion, almost doubled profit to 311 million euros in the first quarter from 158 million euros a year earlier. The company is evaluating options for its regasification plant in Canada, which was left out of the Shell deal and written down by $1.3 billion, according to the earnings report.

“The main beat is in the LNG division,” Neill Morton, an analyst at Investec, said a report. “The caveat is that the bulk of Repsol’s LNG business is being sold” and the extra profits will accrue to Shell and offset the transaction price, he said.

Repsol has demanded compensation for its Argentinian unit, expropriated shortly after YPF announced the discoveries in Vaca Muerta, and estimated to hold at least 23 billion barrels of oil equivalent. The company’s stake could be valued at more than $15 billion, according to a report by IESE business school Professor Pablo Fernandez.

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