Revolution in Libya and labour strikes in Argentina drove down earnings at Repsol last year as the Spanish oil group endured one of the most turbulent periods in its recent history.
Mounting political pressure from the Argentine government over a perceived lack of investment by Repsol’s YPF subsidiary in recent months has weighed on the company’s share price, with investors concerned about possible sanctions, the most extreme being a renationalisation of the former state-owned subsidiary.
Antonio Brufau, Repsol’s executive chairman, was forced to miss presenting the company’s full-year earnings to be in Argentina for crucial negotiations with the government of Cristina Fernández.
With Repsol shares having fallen 18.7 per cent since the turn of the year, Miguel Martinez, chief financial officer, said that the company remained committed to keeping its 57.4 per cent stake in YPF, which accounted for a quarter of operating profits in 2011.
With the conflict in Libya having stopped Repsol’s production in the country for several months last year, and strikes shaving 8.5 per cent off its daily hydrocarbon production in Argentina, recurring net income for the year fell 53.3 per cent year on year to €2.19bn.
This result, however, was compared with 2010 figures which were inflated by the sale of a stake in part of its operations in Brazil to Sinopec. Without this exceptional item, recurring net income fell 7.9 per cent year on year to €2.173bn.
Repsol was also forced to buy back 10 per cent of its own shares from Sacyr, the Spanish construction company, late last year in order to avoid the indebted investor defaulting on a loan and triggering a fire sale.
Repsol sold the shares into the market to investors, bringing a close to several years of open conflict with Sacyr. Operating profit in its upstream division fell 65 per cent to €1.41bn owing to lower production, which fell 13.2 per cent year on year after the disruptions in Libya.
Repsol’s Libyan operations, which resumed production in October, are now producing about 300,000 barrels of oil a day, compared with 340,000bpd before the conflict, the company said.
The group’s reserve replacement ratio, which measures how many new reserves it adds against the amount extracted, increased to 162 per cent over the year, up from 131 per cent in 2010. In YPF, which last year made a discovery in the Vaca Muerta offshore formation that could contain up to 22bn barrels of oil equivalent, operating profit fell by 15 per cent to €1.23bn.
Within Repsol’s liquefied natural gas unit, recurring operating income jumped 205 per cent to €388m owing to higher production and sales from its LNG plant in Peru. However, lower refining margins over the year saw operating income at its downstream business drop 17 per cent to €1.22bn. This was also lower owing to the sale of the Refap refinery in Brazil at the end of 2010.
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