Repsol achieves its highest profit in more than a decade due to the rise in oil

The price of crude oil, at an eight-year high, is high-octane fuel for Repsol's accounts.

The oil company recorded a net profit of 2,499 million euros last year, above analyst forecasts and the highest figure since 2010, a year that was inflated by the capital gains obtained from the partial sale of its Brazilian subsidiary to the Chinese giant Sinopec.

In the last three months of the year alone, the Spanish energy company earned 560 million, also more than the market expected.

The company thus leaves behind the losses of almost 3,300 million suffered in 2020, the worst year of the pandemic, and raises the dividend by 5%.

Net debt was reduced by 15%, to 5,762 million euros.

In 2021, without capital gains of any kind, the Exploration and Production division flew on the back of the high oil price until obtaining an adjusted net profit of 1,687 million.

The industrial business was the second that contributed the most —606 million— thanks to the good performance of the refining area, which was favored by the environment of “gradual recovery in demand”.

And Comercial y Renovables added another 542 million to the adjusted net result, driven by the rise in the price of electricity and, to a lesser extent, by the boom in wind and photovoltaic solar energy projects.

Only the Corporation unit, which includes both the financial result and the accounting adjustments —concepts, both, unrelated to its main business— acted as a drag on Repsol's adjusted net result,

After the strong rise on Wednesday, when an increase of 2.65% was recorded, the shares of the oil company chaired by Antonio Brufau have left this Thursday a little more than half a percentage point.

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Repsol's CEO earned 4.24 million last year, 15% more

Goodbye to two years of heavy losses

The profits reaped by Repsol in 2021 contrast, and in what way, with the strong losses of the two previous years.

In 2020, the hardest year of the health crisis —which led crude oil to trade in negative territory for the first time in its history: investors paid to get rid of barrels instead of buying them—, the oil company left 3,289 million euros , which were added to the 3,816 million of the previous year.

A hole of more than 7,000 million that, despite the good progress of its business in the year just ended, will still take time to fully restore.

However, as long as Brent (the benchmark in Europe) continues to hover around 100 dollars a barrel, it seems only a matter of time: in 2008, the first year in which the crude oil benchmark in Europe was in triple digits, Repsol earned more of 2.7 billion.

Last year, the Exploration and Production branch benefited from the tailwind of an average price of crude above 71 dollars.

The company highlights that "value over volume" prevailed, a statement that in figures meant a cut of almost 12% in average daily production, to 572,000 barrels, while the refining margin grew by nearly 10%.

In addition, the Spanish oil company sold all its productive assets in Malaysia and Vietnam, as well as its participation in the

Arog in Russia, and reduced the number of countries in which this division has a presence from 25 to 15.

The objective: "Concentrate activity in areas in which the company has competitive advantages."

Regarding Venezuela, a recurring hole in Repsol's results in recent years, the company recorded a deterioration of 352 million in 2021 due to the very difficult recovery of its investment in the South American country.

In the rest of the areas, the company makes special mention of the "remarkable performance" in Chemicals - a branch integrated into the Industrial division - and the "recovery of sales" of fuels, both automotive and aviation "once the restrictions have been overcome to mobility as a consequence of the pandemic”.

Also to the "greatest contribution" of the Renewables unit, one of the group's big bets in the coming years, given that its traditional business - that of crude oil and, to a lesser extent, natural gas - has an expiration date.

Almost a quarter of its investments in 2021 were destined for emission-free sources, a figure that for the period 2021-2025 should exceed 35% and that in 2030 the company promises that it will reach 45%.

Regarding a possible sale of a minority stake in its incipient renewable energy business, a possibility that Repsol has been considering for some time, the CEO, Josu Jon Imaz, stressed in the conference with analysts after the presentation of results that "there is still no He has made a decision."

Imaz, however, has left the door open to this partial sale if the company finds "the right partner who shares a long-term vision."

The energy company will propose to the General Shareholders' Meeting a dividend of 0.63 euros per share and a reduction in share capital of 75 million shares.

This operation, in practice, is also a way of rewarding the owners of the company: fewer shares in circulation imply a higher value than the rest.

Spill in Peru and 'Villarejo case'

After the good results achieved last year, Repsol has entered 2022 on the wrong foot: with a spill of more than 10,000 barrels of crude oil in a facility of its subsidiary in Peru and with the reinstatement of the parent company and its president, Antonio Brufau , for the

.

In the first case, the company does not expect "significant impacts" on its accounts and insists on its version of events: that the cause of the disaster was an "uncontrolled movement" of the ship that unloaded crude oil at its refinery, which has led to to sue the shipping company, as this newspaper announced last Monday.

"The spill has generated an impact on populations and the natural environment, as well as on marine species on the Peruvian coast," says the management of the Spanish oil company.

"Repsol ratifies its commitment to continue mitigating and remedying the effects of the spill, as well as to work with the authorities, the affected communities and to respond in the most effective way to the public with total transparency."

In the second case, the energy company shows its “conviction” that they will end up “corroborating the conclusions” reached by the court that dismissed the case last summer —and which was later corrected by the Courtroom— and “reaffirms the absolute correctness of their actions and that there has been no illicit conduct or conduct contrary to the company's Code of Ethics and Conduct by any director, manager or employee, current or past”.

The oil company forecasts crude oil at 69 dollars per barrel in 2022

With a barrel of Brent crude on the verge of 100 dollars, Repsol opts for a more than prudent estimate in the accounts presented this Thursday.

The Spanish oil company believes that the European reference will be around 69 dollars this year -compared to the current 93- to drop to 67 in 2023 and 66 in 2024. In a longer term, between now and 2050 -when a drop in the demand, as electrification gains ground in transport—, the energy company believes that it will be around 60 dollars.

Repsol's forecast for the current year contrasts with the majority of forecasts by analysts and investment banking staff, who believe that Brent will reach triple-digit values ​​throughout the first half of the year as a result of the imbalance between supply and demand and low inventory levels.