Energy group Repsol nearly doubled its profits in the third quarter, buoyed by cost-cutting, debt reduction and improved performances from its upstream exploration and production businesses.
Spain’s top oil producer reported adjusted net earnings of €307m in the quarter, slightly below the €312m expected by analysts polled by Bloomberg, but up 93 per cent year on year.
“Despite lower prices and a decline in refining margins, we have delivered improved recurring results,” Miguel MartÃnez, chief financial officer, said in a conference call. “This demonstrates resilience in the lower part of the cycle.”
The company, which has been trimming expenses since it acquired Canada’s Talisman Energy last year, also raised its full-year cost reduction target from €1.1bn to €1.4bn for 2016.
Brent crude prices averaged $46/barrel during the period, down from $50.50 a year earlier.
Repsol shares closed up 1.7 per cent at €12.50. The shares are up more than 20 per cent for the year to date.
“The key to Repsol’s share price performance this year has been the evidence that the business is resetting post the Talisman acquisition and is able to reduce both costs and debt,” Barclays analyst Lydia Rainforth wrote in a research note.
Cost-cutting and lower exploration expenditures enabled Repsol’s upstream business to trim its adjusted net loss to €28m in the quarter, improved from a loss of €395m loss in the same period in 2015.
Production increased to 671,000 barrels of oil equivalent a day during the quarter, up from 653,000 during the same quarter of 2015.
However, profits at the downstream business fell 42 per cent year on year to €395m during the quarter, as per barrel margins fell from $8.80 to $5.10. Mr MartÃnez said that per barrel margins have rebounded to between $7 and $9 in the current quarter.
Debt went down from €11.7bn to just under €10bn during the quarter, on the sale of a 10 per cent stake in Gas Natural and efficiency gains.
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