Repsol Books $3.2 Billion Charge as Provision for Oil Drop

  • Charge will lead to net loss of 1.2 billion euros for 2015
  • Co. aims to cut investments in 2016 by an additional 20%

Repsol SA, Spain’s largest oil company, said it will book an impairment charge of about 2.9 billion euros ($3.2 billion) for 2015 as a provision after crude prices collapsed.

The charge will lead to a net loss of about 1.2 billion euros for the year, Madrid-based Repsol said Wednesday in a regulatory filing following a board meeting. Excluding one-time items, net income of about 1.85 billion euros for the year will surpass the higher end of the company’s estimates, driven by refining profits and a cost savings, Repsol said. Adjusted fourth-quarter net income will rise 20 percent from a year earlier to about 450 million euros.

As the global oil industry struggles with a price crash, Repsol is faced with the additional task of integrating Talisman Energy Inc., the Canadian oil producer it acquired last year, while also reducing its debt load. Oil this month reached the lowest level since 2003, driving companies globally to cut projects and write down the value of assets.

Repsol’s shares rose 3.4 percent to 9.13 euros at 9:25 a.m. in Madrid. The stock is down 10 percent year-to-date.

Together with the impairment, Repsol also plans to cut investments in 2016 by an additional 20 percent to 4 billion euros, according to the filing. It will also accelerate efforts to seek cost savings from the Talisman assets. The company now identifies potential synergy gains of about $400 million a year, compared with $220 million when Talisman was acquired.

While provisions are “not a complete shock, we are a little surprised that the impairments already include Talisman,” Jefferies Group Plc analysts Marc Kofler and Jason Gammel said in a note to clients Wednesday. The analysts expect all the impairments to be in the exploration and production division.

For the entirety of its assets, the Spanish company intends to reach synergies and efficiency savings of about 1.1 billion euros this year, or more than 50 percent of the target set through 2018 in its business plan.

In Wednesday’s announcement, Repsol also said that its fourth-quarter refining margin will probably stand at $7.30 per barrel, compared with $5.50 per barrel a year ago. The margin is a gauge for refining profitability. The company also said production reached an estimated 697,000 barrels of oil equivalent per day in the period.

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