Repsol's 2016 Annual General Meeting
Repsol held its 2016 Annual General Meeting in Madrid, at which Chairman Antonio Brufau and CEO Josu Jon Imaz presented results and milestones from 2015 and the first months of 2016.
During his presentation, Antonio Brufau highlighted the volatility of raw material prices in 2015, influenced by surplus production, which in the case of OPEC was linked to production increases in Iraq and Saudi Arabia. Brufau called attention to OPEC’s changing role and how prices react in a market economy based on supply and demand. He said that in 2016 the market is seeing both a stabilization of supply and an increase in demand, which is reflected in a recovery in prices.
Brufau also emphasized that the contribution of all energy sources will be necessary in the future energy mix. The Chairman of Repsol pointed to the company’s commitment in the face of challenges facing the sector, especially in the context of growing demand: security of supply, competitiveness, accessibility, sustainability and universality.
He also highlighted the oil and gas sector’s contributions to social well-being and its role in enabling sustainable growth by supplying energy at competitive prices.
Josu Jon Imaz presented to shareholders the earnings from 2015 and from the first quarter of 2016, as well as the company’s main milestones during those periods. Among the most significant was the new Strategic Plan 2016-2020, through which Repsol will focus on extracting value from the growth it has achieved after reaching the objectives set out in its previous Strategic Plan. That culminated in the integration of Talisman in 2015, another of the major milestones of the previous financial year.
The company is taking on a new dimension and profile after its transformational incorporation of Talisman. The acquisition has granted Repsol a great deal of flexibility for decision-making and a high-quality asset portfolio focused on more stable OECD countries.
In order to create value in any scenario and increase resilience, the company is engaged in a series of efficiency and asset portfolio management measures, which have allowed it to reduce the point and? which it generates positive cashflow to 40 dollars per barrel, one of the lowest in the sector.
Imaz presented the results of the 2015 financial year, in which Repsol reached adjusted net income of 1.86 billion euros in, a 9% increase over 1.707 billion in 2014. This result specifically measures the performance of the business units and demonstrates the company’s strength and resilience in the face of adverse situations such as the current low oil and gas prices.
In 2015, Repsol’s integrated business model demonstrated its value, as the positive results in Downstream (Refining, Chemicals, Marketing, Trading, LPG and Gas & Power) helped to offset the impact of low oil and gas prices on Upstream (Exploration and Production). In Upstream, the focus was on more efficient management of investments, as well as on completing the integration of Talisman and maximizing synergies after acquiring the Canadian company.
In 2015, Repsol doubled its hydrocarbon production, significantly increased its volume of reserves, and improved its asset portfolio, increasing its quality and global reach with greater geographical diversification.
Currently, Repsol has a higher proportion of gas in its portfolio of producing assets, a key fuel in the future energy mix. Gas is expected to gain importance in the worldwide energy matrix over the coming decades. Among other applications, it will be important in electricity production, serving as a substitute for less efficient and more polluting fuels, such as carbon.
The Downstream unit demonstrated excellent performance in 2015 with an increase of 113% in its adjusted net income, to a total of 2.15 billion euros.
This result was driven by Repsol’s historically high margins in refining and chemicals, which were achieved as a consequence of the company’s investments in efficiency and operational improvements in recent years.
Repsol assessed the possibility of an ongoing depressed price situation and booked extraordinary impairments amounting to 2.957 billion euros. Furthermore, calculating the value of inventories at a weighted-average cost, had a negative impact of 459 million euros over the course of the year.
At the same time, the company generated income from divestments and the purchase of bonds issued by Talisman, along with other non-recurring income in 2015. The sum of these factors resulted in a net income for the year of -1.227 billion euros. Since most of the impairments booked were in response to the current oil price situation, they may be reversed in P&L statements in the coming years.
With these results, today’s Annual General Meeting approved the continuation of the scrip dividend compensation formula for an approximate amount of 0.80 euros per share for 2015 (considering the distribution made in January, and those that the company has planned for June and July).
First Quarter 2016 Results
During his presentation, the Chief Executive Officer of Repsol went over the results achieved during the first quarter of 2016, in which the company managed a very depressed oil and gas price situation. The company posted an adjusted net income of 572 million euros in the first quarter of 2016, compared with 928 million in the same quarter of the previous year, which had included exceptional earnings of 500 million euros due mostly to the company’s dollar position after receiving funds for the expropriation of YPF. The cash was subsequently used for the acquisition of Talisman.
The measures that Repsol has implemented in recent months to increase efficiency and savings have led the company to achieve positive results despite the context of low crude prices. Both the Upstream and Downstream units saw improved results as compared to the first three months of 2015, which demonstrates the company’s strength and resilience.
During the quarter, average Brent prices fell to a 12-year low (26.21 dollars per barrel on February 11th). Between January and March, the average Brent price was 33.9 dollars per barrel, 37% less than the same period of the previous year.
Despite the market situation, the Exploration and Production business increased its adjusted net profit by 207 million euros compared with the first three months of 2015. In addition, production increased to 714,200 barrels of oil equivalent per day (boe/day), double the production in the same period of the previous year.
For its part, the Downstream business unit increased its adjusted net income by 4%, supported by the strength of the refining area and excellent performance of the chemicals unit, where efficiency plans developed allowed it to take advantage of improved market conditions.
Net debt at the end of the quarter remained steady at 11.978 billion euros, while the company’s liquidity was more than twice the amount of its gross short-term debt maturities.
Renewal of the Board of Directors and Shareholder Agreements
At the Annual General Meeting, Isidro Fainé’s term was renewed for an additional four years and Gonzalo Gortázar’s appointment to the Board of Directors was ratified, also for a four year term.
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