Repsol Falls into Red on Climate Charges

Spain's Repsol swung to a loss, it reported on February 20, on the back of weaker oil and gas prices and major impairments, mostly relating to its promise in December to become a net zero emissions company by 2050.

The producer posted a net loss of €3.82bn ($4.12bn) for the year, versus a net profit of €2.3bn in 2018. The reversal was the result of a €4.85bn one-off charge Repsol booked mainly on its North American assets to account for its climate commitments.

Repsol set aside a further €837mn to cover potential future losses from a legal dispute with China's Sinopec relating to their North Sea joint venture.

Revenues were down 1.4% at €49bn, while adjusted net income declined 13% to €2.04bn. The company earned €1.05bn of this income from oil and gas production, down 21% compared with 2018 because of lower prices. In North America, where Repsol produces much of its gas, Henry Hub average gas prices were down 16% at $2.60/mn Btu.

Repsol's output was 709,000 barrels of oil equivalent/day, compared with 715,000 boe/day during the previous year. The impact of disruptions in Libya, where the civil war has escalated in recent months, was offset by the launch of new wells in the Marcellus area in in the US, Dunvernay in Canada and Akacias in Colombia. Repsol also bought stakes in projects in Norway and the US.

A further €1.46bn of adjusted net income was generated from Repsol's downstream division, down 8% as a result of weaker margins. It also booked  €464mn in corporate losses.

Despite its loss, Repsol managed to increase its operating cash flow by 8% in 2019 to  €5,84bn, putting it in a good position to pay for dividends and continue its share buyback programme.