Repsol shares fell 3% yesterday, despite a 74% rise in adjusted clean net profit for the first quarter, as the oil group’s operating performance undershot analysts’ expectations.
Low energy prices, stalling production in Libya, currency adjustments in Brazil and higher exploration costs more than offset the positive impact of rising refining margins in Spain and encouraged investors to take profits after months when Repsol has outperformed the sector.
Repsol is hoping to open a new chapter in 2015 after several years marked by boardroom battles and a corporate transformation which culminated in the purchase of Talisman Energy and the transfer last month of executive powers from Antonio Brufau to Josu Jon Imaz.
While the integration of Talisman was a long-term strategic move for Repsol to grow in exploration and production, it had a first immediate impact on results as the dollar-denominated cash earmarked for the deal appreciated on the quarter and boosted core profits by €462mn ($525mn).
With the currency effect stripped out, average recurring net profit, adjusted for inventory effects, came in at €466mn, below a market consensus of around €500mn and a €532mn reading last year. The main reason for the miss was the exploration and production arm’s €190mn loss in the quarter compared with a €255mn profit in the first three months of 2014.
This was only partly offset by an 84% jump, to €534mn, of the domestic refining unit’s profit as refining margins hit a record high of $8.7 per barrel.
