Repsol Slips on Prices, Demand
Spanish energy firm Repsol reported an adjusted net income of €447 ($480)mn on its Q1 trading, down 27.7% year on year. Net income, after including €790mn of impairments, was a negative €487mn, although each of its business units had traded profitably.
It said Q1 was marked by "exceptional complexity," referring to the global drop in energy demand and prices while the company kept its facilities operational and played "an essential public service role in the global health crisis."
Repsol has adopted a 'resilience plan' for 2020 that includes additional reductions of more than €350mn in operating expenses and over €1bn in investments, as well as savings of working capital of nearly €800mn on top of what had been planned for the year.
At the end of the quarter, Brent traded at under $20/barrel and in the case of gas, the drops were even sharper, ranging from 36%, on the [US] Henry Hub, to 56% on the Algonquin, in the northeast. "This volatility and decline in international commodities prices has reduced the valuation of the company’s inventories to an extraordinary degree," it said.
The Commercial and Renewables business posted a result of €121mn, compared with €137mn in the same period in 2019. Liquid petroleum gas also saw sales drop as Covid-19 hit the hotel and restaurant sector; and January and February were mild.
The Industrial business saw profit rise 6%, to €288mn, compared with Q1 2019, and this successfully offset the negative impact of the volatile price climate and the depressed demand that mainly affected refining.
Upstream posted a Q1 income of €90mn, compared with €323mn the year before, although average daily production rose 1.4%, to 710,300 barrels of oil equivalent/day. Although exploration activities have been significantly reduced, the six wells that Repsol has drilled so far this year — in Colombia, the US and Mexico — have all shown positive results, yielding estimated resources totalling 650mn boe, with two in Mexico making large oil finds.