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Repsol profit doubles on soaring oil prices but refining weighs
Global Banking & Finance Review®
Company
By Isla Binnie
MADRID (Reuters) -Spanish energy group Repsol posted on Thursday a doubling in first-half net profit, boosted by high oil and gas prices, but its share price suffered as investors had wanted more.
Rapidly recovering demand after COVID-19 lockdowns propelled energy prices to highs that have been driven to records by Russia’s invasion of Ukraine, increasing profits for many of the world’s oil companies.
Repsol racked up net income of 2.54 billion euros ($2.59 billion) between January and June, up from 1.24 billion euros in the same period a year earlier. Brent crude oil prices rose 65% over the period while Henry Hub gas prices soared by 157% on average.
Despite the positive comparisons, shares fell as much as 4% in early trade. CM Capital Markets analysts said net profit for the first half had come in below consensus estimates, in “negative news for the stock”.
In a sign of changing approaches to the way the world manages its energy sources, Repsol made an impairment provision of 1.84 billion euros on its refining business, citing the “volatile international context and increased regulatory pressure on fossil fuels in the European Union”.
But rising profits prompted an announcement that it would increase the size of its share buyback plan and now aims to reduce share capital by 75 million shares from a previous target of 50 million.
Between January and June, a little more than half of the company’s adjusted net income came from its international business, engaged mainly in hydrocarbon exploration and production.
The mushrooming value of hydrocarbons kept in strategic reserves in Spain added 1.2 billion euros to Repsol’s net profit in the first half.
($1=0.9782 euros)
(Reporting by Isla Binnie;Editing by David Goodman and Clarence Fernandez)
Net profit is the amount of money a company earns after all expenses, taxes, and costs have been deducted from total revenue. It indicates the profitability of a business over a specific period.
A share buyback is a company's repurchase of its own shares from the marketplace, reducing the number of outstanding shares. This can increase the value of remaining shares and improve financial ratios.
An impairment provision is an accounting entry that reduces the book value of an asset when its market value falls below its carrying amount, indicating that the asset may not generate expected future cash flows.
Brent crude oil is a major trading classification of crude oil originating from the North Sea. It serves as a global benchmark for oil prices and is used to price two-thirds of the world's crude oil.
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