By Christopher Bjork
MADRID-- Repsol SA said Thursday its adjusted profit tripled in
the fourth quarter as the Spanish company was sheltered from the
oil price plunge by higher refining margins and falling financing
costs.
Repsol said adjusted profit, which excludes gains or losses in
the value of inventories and one-off items, rose to EUR370 million
($420 million) between October and December compared with EUR123
million a year earlier.
Repsol, whose origins lie in refining, spent EUR4 billion in
recent years modernizing two of its five refineries in Spain,
allowing it to produce more refined products and operate at a
profit when crude oil was selling above $100 per barrel. When oil
prices went into free fall in recent months, Repsol's refining
margins widened sharply, injecting a further boost.
For the full year, Repsol's adjusted profit rose 27% to EUR1.71
billion. Oil prices fell 48% over the course of last year, mostly
during the second half of the year.
Including inventories and one-offs, Repsol reported a net loss
of EUR34 million, compared with a net loss of EUR1.09 billion in
the fourth quarter of 2013. Sliding oil prices in the quarter led
Repsol to lower its valuation of its oil inventory by EUR489
million.
The large loss in the year earlier was mainly a result of
charges related to the Argentine government's expropriation of
Repsol's unit YPF SA. Repsol received $5 billion in compensation
from Argentina for the nationalization last year.
Oil and gas production in the fourth quarter grew 16%, as Repsol
started extracting hydrocarbons from new projects in Peru and
Brazil. Even so, the upstream operations earned a meager EUR4
million for Repsol in the quarter, compared with EUR162 million in
the fourth quarter of 2013. Repsol sold crude oil in the fourth
quarter at an average price fo $61.3 a barrel, 28% lower than a
year earlier.
This weakness was more than offset by soaring profits at
Repsol's downstream operations, which include refining and sales at
the company's network of gas stations around Spain. The Madrid
company earned $5.5 per barrel refined, up from $4.1 a barrel a
year earlier.
Repsol has the capacity to refine just under a million barrels
of oil per day, after it upgraded its Cartagena and Bilbao
refineries in recent years, turning them into some of the most
efficient in Europe.
Repsol's refineries churn out mostly diesel, which is widely
used in France and Spain, as well as a smattering of chemicals. The
downstream operations recorded a fourth quarter income of EUR370
million, compared with EUR21 million a year earlier.
Just three of Europe's big oil companies have posted growing
annual profits in 2014: Repsol, Galp Energia SA of Portugal and
Royal Dutch Shell PLC. All of them got a windfall from
refining.
Repsol lowered its net debt by 64% on the year, pushing down the
company's financing costs. Net debt fell as a result of the sale of
Repsol's liquefied natural gas assets to Shell, and compensation it
received last year from Argentina.
Repsol had a debt of EUR1.94 billion at the end of the quarter,
and it held a cash position of EUR9.84 billion.
The bulk of this cash will go into the $8.3 billion takeover of
Talisman Energy Inc., announced by Repsol in December as oil prices
were in free fall. The closing of the deal, expected during the
second quarter, will allow Repsol to roughly double in daily oil
production.
Write to Christopher Bjork at christopher.bjork@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires