Repsol Rises After Earnings Beat Estimates, Maintains Dividend

(Bloomberg) -- Repsol SA’s first-quarter profit fell 28% as oil prices began their unprecedented decline, but it beat analysts’ estimates and shares rose.

Earnings from the Spanish energy producer, like those of its peers, reflect what’s proving to be a historic moment for the industry. Crude’s collapse has forced companies to make drastic cuts in spending and, in some cases, slash shareholder payouts. Still, Repsol has performed better than some of its rivals.

It maintained the dividend, and said net debt won’t increase at the end of 2020 compared with a year earlier. This will ease pressure on the balance sheet at a time other oil majors have been borrowing to maintain access to ready funds as the downturn drains cash flows. The decline in Repsol’s earnings is also less than that of rivals such as Eni SpA.

French major Total SA also reported a 35% decline in first-quarter earnings on Tuesday. It deepened spending cuts for the year and offered to pay some of the dividend for the last three months of 2019 in shares to help preserve cash.

Repsol has already halted its share buybacks and canceled plans to unveil a new clean-energy strategy this month.

Adjusted net income fell to 447 million euros ($488 million) in the first quarter, beating analyst estimates. Earnings from oil exploration and production plunged to 90 million euros from 323 million euros a year earlier.

Shares Rise

Repsol’s shares rose as much as 9.4% and were 7% higher at 8.20 euros as of 9:31 a.m. in Madrid. The stock has declined 41% this year.

Benchmark Brent crude is currently trading below $29 a barrel. It’s down more than 50% since the start of the year as the coronavirus pandemic wipes out fuel demand, meaning oil companies that also refine crude are hit twice over. Repsol estimates an average Brent price of $35 from April to December this year.

The company relies heavily on its downstream business in Spain, where the government ordered one of Europe’s most stringent lockdowns in mid-March to slow the spread of the virus.

In its quarterly report, Repsol for the first time split its downstream units into two: industrial production -- including fuel refining and chemical production -- and commercial and renewable-energy operations, which include filling stations and electricity.

In the industrial division, adjusted income rose 6.3%, bolstered mainly by its refinery in Peru, and by the relatively small energy trading unit. In the other part of the unit, net income slid 12% mostly because of the impact of the virus on consumption.

©2020 Bloomberg L.P.

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