Spain: Repsol Records Exceptional Earnings in its LNG Sector

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.

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.

Repsol signs first Asian LNG supply deal

On February 14, Repsol signed a liquefied natural gas (LNG) supply agreement with South Korea’s state-owned Korea Gas Corporation (KOGAS) to supply LNG to the Asian market. The agreement will involve the shipment of 1.9 bcm of gas equivalent, equivalent to the annual supply of 1 million homes.

The deal, which is Repsol’s first LNG sale in the Far East, reinforces Repsol’s global position in liquefied natural gas marketing. Repsol is the world’s fourth-largest shipper of LNG and already has a dominant position in the Atlantic basin, shipping gas from Trinidad and Tobago to the US and European markets.

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.

[mappress]
Source:Repsol , July 28, 2011;