Repsol Takes Steps to Reduce Upstream Costs

Spain's Repsol S.A. announced Thursday that it is taking steps to reduce costs across its upstream operations as the company produced an overall positive performance in 2015 thanks to a strong performance from its downstream business.

In 2015, Repsol achieved an adjusted net income of EUR 1.86 billion, which was nine-percent greater than the EUR 1.71 billion it managed in the previous year. The firm said that its integrated business model has demonstrated its value, with the income from its downstream business offset the poorer performance of its upstream business unit amid the falls in oil and gas prices last year.

Hydrocarbon production reached 697,500 barrels of oil equivalent per day during the fourth quarter of 2015 – which represented an increase of 88 percent over its average production a year earlier. This was boosted significantly by last year's acquisition of Talisman, whose assets were included in Repsol's overall production figures from May 8, 2015.

But the steep decline in oil and gas prices during 2015 meant that the upstream unit made an adjusted net loss of EUR 909 million, compared to a profit of EUR 589 million in 2014. By contrast, Repsol's downstream business fared better – more than doubling its net profit to EUR 2.15 billion in 2015 from EUR 1.01 billion in 2014.

Repsol said that this year it has introduced additional measures to reinforce its strategy. These includes increasing the savings it aims to make from the integration of the Talisman business to $400 million from initially-identified synergies of $220 million. It will also reduce the investments it had planned for the 2016-to-2017 period by 20 percent, meaning it will save an additional EUR 1.8 billion.

Commenting on the results, oil sector analysts at Jefferies noted that there were few statements regarding the outlook for the company but that "management is moving to address Repsol's high debt".

A former engineer, Jon is an award-winning editor who has covered the technology, engineering and energy sectors since the mid-1990s. Email Jon at jmainwaring@rigzone.com

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