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    Repsol Core Earnings Collapse in Q2


The Spanish major swung to a net loss, reflecting current low prices and a more bearish outlook for them in the long term.

by: Joseph Murphy

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Repsol Core Earnings Collapse in Q2

The earnings before interest, tax, depreciation and amortisation at Spain's Repsol came to only €589mn ($683mn) in the first half, down from €3.71bn a year earlier, it said on July 23, owing to the destruction of oil and gas demand caused by the coronavirus (Covid-19) pandemic.

Repsol's adjusted net income came to €189mn, compared with €1.12bn a year earlier, whereas its unadjusted result came to a loss of €2.49bn, versus a €1.12bn profit in the first half of 2019. This reversal was on the back of €1.09bn in inventory write-downs relating to the collapse in oil and gas prices, and a further €1.59bn in upstream impairments, booked to reflect the weaker price outlook.

The Spanish major now sees oil averaging $59.6/barrel between 2020 and 2050, after previously projecting an increase to $87/b by 2035.

The Spanish major, which operates mainly in Europe, Latin America and the Asia-Pacific region, produced 675,000 barrels of oil equivalent/day of hydrocarbons in the first half, down from 697,000 boe/d a year earlier. But gas output was unchanged at 446,000 boe/d. Its realised prices slumped to $35.8/b from $59.6/b for oil and to $2.2 from $3.2/'000 ft3 for gas, it said.

Repsol is targeting a further €450mn cut in operating costs and a €1.1bn reduction in investments. It wants to optimise its working capital by almost €800mn. The company also hailed a €500mn reduction in its debts over the period, noting that its liquidity had risen to almost €10bn or 2.43 times its short-term maturities. It shored up its financial position by issuing €3bn in bonds. 

"We are fulfilling the objectives of our resilience plan, ensuring the solidity of our balance sheet and reaffirming our commitment to lead the energy transition and reach net zero emissions in 2050," Repsol CEO Josu Jon Imaz said in a statement. Repsol will unveil a new plan for reaching this net-zero goal while maintaining its value in November, two months after BP announces its own strategy.