Repsol Profit Falls 57% on Declining Oil, Gas Prices

By Gianluca Baratti

May 8 (Bloomberg) -- Repsol YPF SA, Spain’s largest oil company, said first-quarter profit fell 57 percent as crude and natural-gas prices declined and production dropped.

Net income slid to 516 million euros ($692.6 million) from 1.21 billion euros a year earlier, the Madrid-based company said today in a regulatory filing. Net adjusted for recurring items sank 59 percent to 401 million euros, beating the 333 million- euro median estimate of nine analysts surveyed by Bloomberg News.

Repsol and competitors Royal Dutch Shell Plc, BP Plc and Total SA, Europe’s three largest oil companies, have reported lower quarterly earnings as the recession curbed energy demand. U.S. oil prices averaged $43.31 a barrel in the period, 56 percent lower than a year earlier, while U.S. natural-gas futures were down 49 percent.

Profit beat estimates because Repsol benefited from currency gains and lower-than-expected taxes, Jason Kenney, head of pan-European oil and gas equity research at ING Wholesale Banking, said in an e-mailed note. The company’s tax rate was 39.5 percent in the period, below the 42 percent forecast by ING.

Repsol rose as much as 2.5 percent to 15.40 euros in Madrid trading, and was up 2.2 percent at 15.35 euros as of 11:01 a.m. local time, valuing the company at 18.8 billion euros.

Refining Margin Drops

Repsol’s refining margin, or the profit from turning crude into fuels, fell 13 percent to $4.60 a barrel in the quarter, mainly because of narrower middle-distillate spreads and a smaller difference between light and heavy oils, the company said. Earnings from the liquefied natural gas business dropped 7.8 percent to 284 million euros.

Refining, marketing and LNG operations “underperformed forecasts,” Kenney said. “LNG saw lower Spanish electricity prices and a drop in sales to Spanish combined-cycle gas turbines as well as tighter margins,” the Edinburgh-based analyst wrote. Kenney recommends retaining Repsol shares.

Repsol’s oil and gas production slumped 4.8 percent from a year earlier to 317,000 barrels of oil equivalent a day. Adding output from the company’s Argentine YPF SA unit, production fell 4.9 percent. YPF, which is 84 percent owned by Repsol, reported a 59 percent drop in first-quarter net income on May 6.

Repsol’s net income adjusted for inventories retreated 28 percent to 1.33 billion euros. The company recorded an inventory loss of 23 million euros in the quarter, compared with an inventory gain of 274 million euros a year earlier.

To contact the reporter on this story: Gianluca Baratti in Madrid at gbaratti@bloomberg.net