Repsol registered some net losses of 2,578 million euros in the first nine months of the year after recording an impact of 2,774 million euros due to the global Covid-19 crisis in the valuation of its inventories and due to the revision in its hypothesis of future oil and gas prices and the value adjustment of its Upstream assets (Exploration and Production), the company reported.
Specifically, the unprecedented situation caused by the coronavirus, which led throughout this year to a historic collapse in oil and gas prices, has had a negative impact of 1,048 million euros in the company’s inventories.
In addition, the group chaired by Antonio Brufau has adjusted its price assumptions, which has affected the book value of its Upstream assets, reflecting an impact of 1,726 million euros.
In this complicated environment for the sector due to the crisis caused by the pandemic, the adjusted net result of the oil company, which specifically measures business performance, amounted to 196 million euros until September.
This figure incorporates the effects of the measures adopted by the group after the start of the pandemic, which have allowed the adjusted net result of the third quarter to with 7 million euros, improve by 265 million euros the negative result of 258 million euros from the previous quarter.
Thus, this quarterly result already confirms an improvement as of the third quarter, in a sector especially hit by the Covid-19 crisis, and improves analysts’ estimates for the company.
The CEO of Repsol, Josu Jon Imaz, valued that the company is “showing strength and resilience in an unprecedented scenario, at the same time we start innovative projects to achieve a more decarbonized world by deploying all possible technologies, since all energy sources are necessary to respond to this challenge in a fair and effective way.
The oil company has registered these results in an environment in which between January and September the average price of Brent crude fell by 36% and that of American Texas (WTI) by 33%, with average prices close to 40 dollars per barrel for both indicators. For its part, Henry Hub gas decreased its average price by 30%, yielding an average price for the period of 1.9 dollars per Mbtu.
Last March, the energy company launched a Resilience Plan to face the impact of Covid-19 in order to reinforce cash generation and strengthen the balance sheet.
Following progress in achieving the objectives set by this plan, at the end of the third quarter the company revised the objectives for the year, increasing its initial estimate of a further reduction in operating expenses to 500 million euros, the cut of investments up to 1,200 million and the optimization of working capital by nearly 700 million euros, compared to 450 million in cost reductions and 1,100 million in cuts in investment already reviewed in July.
At the end of the third quarter, the company had already managed to reduce operating expenses by more than 350 million euros and optimized working capital by more than 400 million.
The plan also establishes that Group’s net debt does not increase in fiscal year 2020. In this sense, at the end of the third quarter, net debt fell by 882 million euros compared to December 31, 2019, to stand at 3,338 million euros.
In addition, during the period, the operating cash generation of the group led by Josu Jon Imaz in all its businesses was 2,122 million euros, with 1,258 million euros in this third quarter.
Liquidity for more than 9,000 million
In addition, so far in 2020, Repsol has strengthened its financial position through five bond issues for a total of 3,850 million euros, of which 1,500 million correspond to subordinated perpetual bonds, which strengthen its equity, in addition to its liquidity. Committed and unused credit lines also increased by 1,605 million euros.
In this way, the group’s liquidity stood at 9,099 million of euros at the end of September, which covers 3.43 times the short-term maturities, a figure that also increased compared to 2.43 times the previous quarter.
By business, Commercial and Renewables obtained a result of 332 million euros in the first nine months of the year, penalized by the collapse in demand caused by Covid-19, with a decrease in sales, especially in service stations (24%) and GLP.
However, cost optimizations and a focus on products with greater added value, allowed the Commercial and Renewables business to record a result of 169 million euros between July and September, higher than in the second quarter of this year and even to the same period of fiscal year 2019.