Repsol Beats Estimates on Surprise Profit From E&P Business

  • Results reflect lower exploration costs, efficiency savings
  • Earnings also boosted by profit from chemicals and refining

Repsol SA reported earnings that beat analyst estimates after posting a surprise profit from exploration and production and higher income from refining and chemicals. The shares jumped the most in three weeks.

Adjusted net income dropped to 572 million euros ($657 million) in the first quarter from 928 million euros a year earlier, exceeding the average 261 million-euro estimate of 11 analysts surveyed by Bloomberg. The E&P division made a 17 million-euro profit, compared with estimates for a 195 million-euro loss.

The upstream results reflect lower exploration costs, higher production volumes, favorable exchange rates and savings from an “intense” efficiency program, the Madrid-based oil producer said Thursday in a statement. That program boosted cash by more than 100 million euros during the quarter.

Like most of the oil industry, Repsol is slashing expenses, cutting staff and selling assets to weather the slump in crude to a 12-year low. Wider refining margins have helped the company and its European competitors Royal Dutch Shell Plc and BP Plc to offset the crude-market rout, yet the unexpected profit from oil production sets it apart from most of its peers.

“One-off upstream support once again gets Repsol out of a hole" Jason Kenney, an analyst at Banco Santander SA in London, said in a note to clients. Kenney also said results from the downstream business, which includes refining, chemicals and trading, were “impressive.”

Adjusted net income at that division rose to 556 million euros from 534 million euros, principally because of a strong chemicals business and a lower tax load in Spain, Repsol said.

Repsol stock, the worst-performer among the European oil majors over the past year, surged as much as 6 percent in Madrid, the biggest advance since April 13. It was up 4.7 percent at 11.31 euros as of 9:59 a.m. local time, making it the biggest gainer on the Euro Stoxx Oil & Gas Index.

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