Repsol YPF S.A. (REP) reported fourth-quarter earnings of 17 euro-cents per share (25 cents per ADR), compared to the Zacks Consensus Estimate of 32 cents and year-earlier loss of 15 euro-cents (21 cents per ADR).
Despite a 5.8% increase in production volumes, quarterly earnings missed drastically due to consistently weak natural gas prices and lower refinery margins.
Estimate Revisions Trend
We see a downtrend in estimate revisions. In the last 30 days, 3 of the 5 analysts covering the stock lowered their estimates for the full fiscal 2010, while no one moved in the opposite direction. In the last 7 days, one analyst lowered the estimate and no upside movements were made.
Currently, the Zacks Consensus Estimate for full fiscal 2010 earnings is $2.29 per ADR, which is well above the full fiscal 2009 earnings of $1.85.
Operational Performance
Adjusted upstream operating income during the quarter was €225 million ($332 million), down approximately 11% from the year-earlier level due to poor gas price realizations and higher operating costs.
Repsol’s liquids price realizations averaged $69.4 per barrel, up more than 44% from the year-ago quarter. The average natural gas price realization during the quarter was $2.6 per thousand cubic feet (Mcf), down nearly 30% year over year.
Total production averaged 349 thousand barrels of oil equivalent per day (MBOE/d) — 43% liquids — up 5.8% from the year-ago level. A solid production volume from the Shenzi field in the United States was the main contributor to this volume increase. Investments in the Upstream business segment were €180 million ($266 million), down approximately 45% from the year-ago level. Exploration expenses were up 60% year-over-year to €176 million ($260 million).
Adjusted operating income from the Downstream segment was €166 million ($245 million), compared to an operating loss of €483 million ($713 million) in the fourth quarter of 2008. The company invested €422 million ($623 million) in its Downstream segment during the quarter. Adjusted operating income from YPF significantly increased from the year-earlier quarter to €331 million ($489 million).
The company’s adjusted income from operations in Gas Natural SDG segment was up 36% year over year to €185 million ($273 million). Finally, Repsol’s LNG division earned €11 million ($16 million) during the quarter, down nearly 70% from the prior-year quarter.
Repsol’s net debt was about €10.93 billion ($16.14 billion) at the end of the quarter, reflecting a net debt-to-capitalization ratio of 30.3%.
Outlook
Repsol replaced 94% of its 2009 production, representing one of the weakest efforts in its peer group. The structural and fundamental problems in Repsol’s business and asset portfolio continue to keep us on the sidelines. Although the recent discoveries could boost the reserves of the company as well as stabilize and build earnings, we see better investment opportunities in the integrated space than Repsol.
Read the full analyst report on “REP”
Zacks Investment Research
