Repsol YPF Posts US$1.29bn Profits in H1

Spanish oil company Repsol YPF (NYSE: REP) posted net profits of 1.08bn euros (US$1.29bn) in the first half of 2004, down 7.7% from the same period in 2003, the company said in its earnings statement Thursday (July 29).

In the second quarter, net income increased 12.6% to 555mn euros due to higher oil prices and better international refining margins, offset by the negative effect of a higher euro against the US dollar year-on-year and higher company taxes.

EXPLORATION & PRODUCTION

Overall net operating income increased 5% to 1.27bn euros in the first half and Latin American net operating income increased 3% to 1.11bn euros.

The reasons for this performance were: higher gas production and sales, mainly in Bolivia and Argentina; high international oil prices and improved gas realization prices, offset by the depreciation of the US dollar against the euro; the application of the natural gas export tax in Argentina, the country's higher taxes on crude exports and lower oil prices due to the price-fixing agreement between producers and refiners; a rise in the level of crude oil stocks; and strikes in Argentina and operating problems in Trinidad & Tobago.

The average price for liquids in the half rose to US$28.9/b compared to US$25.8/b in 2003, while the average gas price in Argentina was 17.4% higher year-on-year.

Average first half year production was 1.15 million barrels of oil equivalent a day (mboe/d), 6.4% more in the same period 2003. However, the strikes in Argentina and Trinidad & Tobago had a negative impact of 11,500boe/d.

Half-year gas production rose 16.6% year-on-year to 460 million cubic feet a day (mcf/d) mainly due to growth in Argentina, where gas output rose 16.5% to 277mcf/d because of higher domestic demand, and Bolivia where production jumped 51.7% to 130mcf/d because of higher sales to Brazil and the start of exports to Argentina in the second quarter.

The production of liquids dropped 2.2% versus first half 2003, largely in Argentina. The labor strikes in Argentina and in Trinidad & Tobago in H1 led to a production shortfall of 10,400b/d.

Repsol YPF's overall lifting cost for the half year was US$1.87/boe, 8.2% higher than the year before. Exploration expenses amounted to 87mn euros, up from 78mn euros the year before.

REFINING & MARKETING

Overall net operating income increased 4.8% to 739mn euros, mainly due to higher refining margins, but Latin American net operating income fell 28.2% to 204mn euros.

In Argentina, there was a slight 1.2% drop in sales to 6.1 million tons (mt) because of a 15.8% fall in exports, but light product sales were up 5.2% year-on-year. Gasoline and diesel sales increased 4.1%, with a 0.2% drop in gasoline and a 5.1% jump in diesel.

Liquefied petroleum gas (LPG) sales in the first six months were 4.9% higher in Latin America, shored up by strong growth in Peru and Ecuador. Retail margins widened in Argentina, Chile and Ecuador, but dropped in Bolivia and Peru, in the latter because of interference from state oil company Petroperu in the wholesale price formation.

PETROCHEMICALS

Overall net operating income decreased 16.5% to 91mn euros and Latin American net operating income fell 5.5% to 52mn euros.

Lower performance was caused by narrower international margins on Repsol's product mix, notably on cracker and derivative products in Europe, where higher product prices were unable to compensate for rises in feedstock costs.

At 1.96mt, half-year petrochemicals product sales were slightly lower than 1.98mt the year before.

GAS & POWER

Overall net operating income increased 35.4% to 134mn euros and Latin American net operating income increased 160% to 26mn euros.

This result is mainly attributable to sales growth in countries including Brazil, Argentina, Colombia, and Mexico. In addition, Repsol's higher stake in Gas Natural SDG and the contribution from Puerto Rico, whiich has consolidated since November 2003, also helped.

Higher sales stemmed from economic recovery in the region and an increase of 287,000 customers in the past twelve months, bringing the total in Latin America to 4.4 million.

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