Home' Trinidad and Tobago Guardian : August 1st 2013 Contents AUGUST 2013 • WEEK ONE www.guardian.co.tt BUSINESS GUARDIAN
ENERGY | BG9
Repsol s chief financial officer (CFO) Miguel
Martinez has credited T&T as one of five coun-
tries that contributed to its 12 per cent production
increase in the first half of 2013 (2Q 2013), during
a conference call last week to present the com-
pany s results.
"In the upstream business during this quarter,
production of hydrocarbons reached 359,000
barrels of oil equivalent per day (boe/d), which
represents a 12 per cent increase year on year.
The additional volumes arise mainly from the
ramp up of the projects that came on stream
during the second half of 2012 and the beginning
of 2013 in Russia, the US, Spain and Brazil, and
the improved performance of our operations in
T&T, partially offset by the reduction in volumes
from Ecuador, where we sold a 20 per cent stake
in Block 16 last September, and Libya, due to
In this quarter, Repsol released a current-
cost-of-supplies (CCS) adjusted net income of
509 million euros, 6 per cent higher, year on
year; and a CCS adjusted operating income of
979 million euros, 5 per cent higher than in the
same quarter last year.
In this first half, Repsol registered a CCS
adjusted net income of 1.2 billion euros, 26 per
cent higher year on year; and a CCS adjusted
operating income of 2.3 billion euros, 14 per
cent higher than during the first half of 2012.
In its upstream business, Repsol said its adjust-
ed operating income during the second quarter
of 2013 was 514 million euros, in line with the
same quarter of last year, mainly due to the
increasing production by lower realisation prices.
"The explained 12 per cent production increase
had a positive effect of 51 million euros, while
the related increase in the depreciation charges
had a negative impact of 33 million euros," Mar-
Exploration costs decreased this quarter by
86 million euros, if compared to the same period
last year, due to the success in exploratory wells
during the period, the conference call heard.
Repsol group realisation prices had a better
performance than Brent, due to higher volumes
in Brazil and in the US, while gas realisation
prices decreased year on year, due to the sales
volume mix. These two price effects have a neg-
ative impact of 71 million euros, he said.
Still, the CFO told investors: "Let me empha-
sise that the 10 per cent production growth
target for the year is achievable. Regarding our
2013 exploratory activity, we have already
achieved the 300 million barrels of oil equivalent
annual target of contingent resources addition.
During the first part of the year, 12 exploration
wells and one appraisal were completed. Nine
of these wells located in the US, Brazil, Colombia,
Algeria and Russia had positive results. We are
currently in operations in Brazil, Canada and
the United States and Indonesia."
He said that in the second half of the year,
"we will continue drilling the ongoing wells and
will continue with exploratory campaign in Libya.
We will start new wells in Norway, Kurdistan
and the Gulf of Mexico. And, by the year end,
we will start with new winter campaigns in
Alaska and Russia, expecting to achieve the
target of drilling 32 wells this year."
Elsewhere in the Caribbean, Martinez said
Repsol also acquired additional acreage in Guyana.
On the US$6.7 billion sale of its liquified
natural gas (LNG) assets---inclusive of its stake
in Point Fortin-based Atlantic (formerly Atlantic
LNG)---Martinez said the sale to Royal Dutch
Shell is on schedule to be completed by the end
"We continue working on the closing of the
transaction, along with Shell. We have received
all the anti-trust approvals, and we will be con-
tinuing with the initial plan to close the deal
before the year end."
Asked by Lydia Rainforth, a Barclays analyst,
if there is "any risk at all that the deal doesn t
happen," Martinez said Repsol is sure the sale
"I m totally positive that the deal will be
closed. We already have the anti-trust permit.
And the point (is) that we have exactly 152 con-
tracts to be transferred to Shell. And in all these
contracts we have other parties, so it takes time.
It takes time, but things are going well. My com-
ment, three months ago, was that probably by
September, or October there would be possi-
bilities; (but it) probably would fall more in the
fourth quarter (of 2013). But the answer is that
we think that (it) will, for sure, go ahead."
Investors learnt too that the sale of the LNG
assets is holding up Repsol s upgrade by the
credit ratings agencies Standard & Poor s,
Moody s, and Fitch Ratings. (See table attached
for agencies latest ratings.)
Another analyst, Irene Himona of Societe
Generale, asked: "You ve now obviously sold
LNG. You ve exchanged the prefs (preference
shares) for a bond. You ve got the scrip dividend
going. What is it that the credit agencies want
you to do from here on in order to, at some
point, have a chance for a credit rating upgrade?"
Martinez responded: "I agree with you, but
basically they want us to close the deal with
Shell. Once this deal is closed, all the ratios
would be in the upper part of the BBB and then
we ll have to wait. The agencies always take
their time to move you up. They re a little faster
moving you down, downgrading you. But, in
our case, I have to say that they have been quite
conscious of the problem we face after the con-
fiscation of YPF. We presented the plan with
the measures you mentioned and some other
ones, and we have delivered everything. So I
think it s only pending on the closing of the
Another US$6 billion sale
Once the planned sale of the LNG assets to
Shell is completed, investors also heard during
the conference call that another US$6 billion
sale---that of its stake in Spanish utility Gas Nat-
ural Fenosa---could materialise. In response to
a question by Haythem Rashed, a Morgan Stanley
analyst, Repsol CFO Martinez confirmed that
the US$6.7 billion sale of its LNG assets to Shell
paves the way for the eventual sale of its (Repsol s)
US$6 billion stake in Gas Natural Fenosa.
Gas Natural SDG, SA, trading as Gas Natural
Fenosa, is a Spanish natural gas utilities company
which operates primarily in Spain but also in
Italy, Mexico, Colombia, Argentina, Puerto Rico,
Moldova and Morocco.
Thanks to its stake in Gas Natural Fenosa,
Repsol sells LNG from Atlantic in T&T to that
company (Gas Natural Fenosa). However, once
Repsol completes the sale of its stake in Atlantic
to Shell, it will have less need for the sale agree-
ment with Gas Natural Fenosa.
The Repsol CFO said, in response to the Mor-
gan Stanley analyst s question about whether it
makes sense to sell the Gas Natural Fenosa stake:
"You are right in your comment. Part of the
rationale of our staking Gas Natural (Fenosa)
was the ability to make money throughout (the)
LNG division and the rationale disappeared once
we sold the LNG business to Shell. Having said
so, well, we are not in a hurry."
He explained that holding a stake in Gas Nat-
ural Fenosa is still beneficial to Repsol, and then
reiterated that Repsol is "not in a hurry, but it s
true that it (selling its stake in Gas Natural Fenosa)
is something we seriously have to think about."
According to a Thomson Reuters calculation
on July 26, Repsol s stake in Gas Natural Fenosa
is worth 4.5 billion euros (approximately US$6
billion) at what were then "current market prices."
by fewer cargo deliveries," he said.
Jones went on to explain that disruptions in Nigeria have resulted
in the loss of five cargo liftings. There have also been, he said,
fewer than expected liftings from Egyptian LNG due to the higher
than agreed volumes diverted to the domestic market.
"Despite this, the LNG Shipping & Marketing total operating
profit for 2013 is expected to remain in the US$2.5-US$2.7 billion
range," Jones said, adding that this outlook assumes a reduction
in Egyptian domestic take in the fourth quarter, the receipt of
two cargoes from Qatar and no further disruptions to Nigeria
LNG supply. The BG Group is the second largest shareholder in
Point Fortin-based Atlantic (formerly Atlantic LNG). BP is the
Earnings for the group fell 3 per cent to US$986 million,
reflecting the decrease in operating profit partially offset by a
slightly lower effective tax rate, Jones said. He added that cash
generated from operations decreased 11 per cent to US$2.8 billion
as a result of reduced operating profits and a lower working capital
Jones said: "During the quarter, the group s portfolio rational-
isation programme progressed, with the completion of the sale
of our interests in Gujarat Gas in India for US$422 million. We
also signed binding agreements with CNOOC for the sale of
certain additional interests in our QCLNG project in Australia for
Jones said the group s capital investment on a cash basis of
US$2.6 billion in the quarter was up 9 per cent. At the end of
the quarter, the group s net debt and gearing ratio were US$11.2
billion and 25.2 per cent, respectively.
That notwithstanding, in line with its "established policy, the
board (of directors the BG Group) has approved an interim dividend
of 13.07 cents per share, which is half of the 2012 total dividend.
The dividend will be paid on September 6 in sterling, which
amounts to 8.51 pence per share.
Continued on page 9
T&T adds to Repsol 12% production increase
Links Archive July 31st 2013 August 2nd 2013 Navigation Previous Page Next Page