ISSN 2330-717X

Repsol Posts First Half Net Income Of 1.344 Billion Euros


Repsol posted net income of 1.344 billion euros in the first half of 2011, slightly higher than the 1.338 billion euros of the year-earlier period. The group’s operating income totalled 2.722 billion euros compared with 3.004 billion euros in the same period of the previous year.

The company’s performance in the first half of the year compensated for unfavourable circumstances, such as the partial halt in production in Argentina due to labour strikes, which have now been resolved, and the suspension of production in Libya. These factors were partially compensated by the improvement of international oil prices, the recovery Repsol’s chemicals business and excellent results from its LNG business.

Repsol’s oil and gas realization prices, which rose 16.3% and 22.2% respectively, partly made up for lower liquids production in the period.

Operating income for the Upstream Business was 806 million euros in the first half of the year, 10.3% higher than in the year-ago period, while LNG earnings grew spectacularly due to the start-up of Peru LNG and greater activity at Canaport. Despite the recovery of the chemicals business, operating income at the Dowstream unit fell 18.5% to 756 million euros due to refining margins and lower profit from the LPG business.

Gas Natural Fenosa posted operating income of 512 million euros, a decrease of 7.1% from last year due to a change in its consolidation perimeter. YPF’s operating income was 601 million euros compared with 831 million in the first six months of 2010 due to prolonged strikes during the period, now solved, and an inflationary effect on costs.

Adequate management and ongoing financial discipline allowed the company to achieve an excellent financial result, reducing the group’s debt, excluding Gas Natural Fenosa, to 1.999 billion euros on June 30, 2011. Including preferred shares, debt fell by 263 million euros in the semester.


During the first half of the year, the company has sold shares in YPF through a number of operations. Petersen Group also exercised in May an option to buy 10% of the Argentinean company. Following these deals, Repsol retains a 57.4%, Petersen Group holds 25.5% and free float stands at 17.1%. An additional purchase option for 1.6% exists which, if executed, would reduce Repsol’s stake to 55.8% a shareholding the company considers adequate.

These sales, which have not affected the consolidated results for the period, have bolstered the company’s resources.

In June Repsol and Russia’s Alliance Oil Company signed a memorandum of understanding to create a joint venture that will seek exploration and production opportunities in the Russian Federation, the world’s largest oil and gas producer.

Upstream: higher oil and gas realisation prices

Operating income for the Upstream Business was 806 million euros in the first half of 2011, an increase of 10.3% from the year-earlier period. The increase was mainly the result of higher crude oil and gas realisation prices which compensated for lower volume produced.

Especially significant was the increase in Repsol’s gas realization price, which rose 22.2% compared to a 10.6% decline of the Henry Hub reference price in the same period. Repsol’s crude realization price rose 16.3%, with a positive effect of 325 million euros on the operating income of the Upstream division.

Production in the first half was 310,021 boe/d, a decline of 10.1% from the year-earlier period. The fall is explained by circumstantial factors such as the suspension of activity in Libya and lower output in Trinidad and Tobago due to maintenance and in the Gulf of Mexico as a consequence of the drilling moratorium, which has now been lifted. This has allowed activity to return to normal in the Shenzi field

Investments in the Upstream unit totalled 790 million euros, a 115.3% increase from the first six months of the previous year. Field development accounted for 47% of total expenditure, mainly in the United States, Bolivia, Venezuela, Trinidad and Tobago, Brazil and Peru. Exploration investment was mainly focused on Brazil and the United States.

LNG: exceptional earnings

The LNG business’s operating income for the first half was 168 million euros, significantly higher than the 11 million euros for the same period of the previous year.

These earnings are the result of the growth in sales volumes, basically from Peru LNG since it started production in June 2010 and increased activity from Canaport in Canada added to higher marketing margins.

Downstream: the chemicals business consolidates its recovery

Operating income at the Downstream unit (Refining, Marketing, LPG, Chemicals and Trading) was 756 million euros in the first half of 2011, a 18.5% decrease from the same period of the previous year.

The lower earnings are mainly the result of lower refining margins, lower sales and the reduction of earning from the LPG unit as the regulated prices do not cover the cost of the raw material. For its part, the chemicals business consolidates its positive results with the recovery of margins and volumes.

Investment in the Downstream unit totalled 652 million euros in the period, spent mainly on the strategic expansion projects of the Cartagena and Bilbao refineries.

Both these strategic projects will be put into operation this year, increasing the efficiency of the business, the margins and considerably increasing the volume of diesel produced, helping reduce Spain’s import needs.
YPF: lower production

YPF’s operating income in the first half totalled 601 million euros, a 27.7% decline from the previous year. The reduced earnings are a result of prolonged strikes, now resolved, and their inflationary effect on costs.
The strikes also affected output in the first half of the year, when production of hydrocarbons was 484,957 boe/d, a 12% fall from the previous year.

YPF in July announced a new shale oil find in the Bajada de Añelo exploration well in the Bajada de Añelo block in the Neuquén basin. The well produced an average 250 barrels of high quality oil a day in line with the results obtained previously in the same formation in Loma la Lata. The results confirm the positive expectations of the Vaca Muerta formation.

Investment in YPF during the semester totalled 741 million euros, of which 582 were spent on exploration and production. Of the E&P investment, 72% was dedicated to developing projects.

Gas Natural Fenosa

The operating income of Gas Natural Fenosa for the first half was 512 million euros, compared with 551 million euros in the first half of 2010.

The decline is mainly a consequence of a worse performance of the electricity business in Spain and by the smaller consolidation perimeter consequence of the divestments made after the merger of Gas Natural and Union Fenosa. This decline was partially offset by higher electricity distribution in Spain and by improved earnings from wholesale Gas sales.

On June 17, the Board of Directors of Gas Natural Fenosa approved the incorporation as shareholder of Sonatrach with a 3.85% stake which the company will buy for 515 million euros. This agreement, which ends the arbitration process that had existed between both companies, will be implemented following approval by the relevant Algerian authorities.

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