MercoPress. South Atlantic News Agency

Repsol-YPF doubles profits; targets Brazil’s new fields instead of Argentina

Chief Executive Officer Antonio Brufau

Repsol-YPF, Spain’s biggest oil company, said fourth-quarter profit more than doubled after refining margins improved and crude prices increased. Profit adjusted to exclude inventories and one-time items climbed to 499 million Euros from 241 million Euros a year earlier, the Madrid-based company said on Thursday.

The company’s refining margins are improving after demand fell with the global economic slump. It’s investing in exploration in Brazil offshore Santos Basin and elsewhere to increase output while seeking to reduce stakes in maturing fields in Argentina.

Repsol’s results makes the company an attractive target, Chief Executive Officer Antonio Brufau said at a news conference. “If someone wants to put a hand on this company, it costs 40 billion Euros, minimum,” he said.

Repsol shares rose 1.6% to 23.88 Euros in Madrid. The stock is up 15% this year, valuing Repsol at 29 billion Euros. The company is spending to improve refining margins and new units at its refineries in Bilbao and Cartagena will start operating at the end of 2011.

The refining margin indicator for Spain, a measurement of the profit from turning crude into fuels, widened to 2.90 USD a barrel last quarter from zero a year earlier.

Repsol this week announced it’s suspending its exploration and production operations in Libya. Repsol has been in Libya since the 1970s, and had net production of 34,777 barrels a day there in 2009, equal to 3.8% of its output. The unrest in Libya will “clearly” impact earnings at Repsol, Brufau said today.

The company forecasts annual production growth of as much as 4 percent through 2014 as projects in Brazil and Peru start output. Repsol plans to invest 28 billion Euros in the period 2010 to 2014, developing fields in Venezuela, Bolivia and Algeria. It will invest about 6 billion Euros this year and its drilling plan for 2011 includes 25 to 30 exploration and evaluation wells, Repsol said in the presentation.

Oil and gas production at Repsol’s upstream division, which doesn’t include the Argentine unit YPF, fell 2.3% from a year earlier to 341,000 barrels of oil equivalent a day in the fourth quarter as some fields dropped and because of inspections at the U.S. Shenzi project. Output from Buenos Aires-based YPF fell 2.5% to 511,000 barrels a day following an oil workers’ strike in southern Argentina.

Repsol has been seeking to sell part of its 80% stake in YPF and aims to keep at least 51%, Brufau said in April 2010. On Dec. 23, it agreed to sell 3.3% for 500 million USD to funds advised by Eton Park Capital Management, Capital Guardian Trust Co. and Capital International Inc. Eton Park also has an option to buy an additional 1.63%.

Argentine investor Sebastian Eskenazi, whose family bought 15% of YPF from Repsol for 2.2 billion US Dollars in 2007, also has an option to boost the stake to 25% by 2012.

China Petrochemical Corp., China’s second-largest oil and gas producer, last year agreed to invest 7.1 billion USD in Repsol’s Brazilian unit as the company raises funds for offshore projects. That deal generated a 3.76 billion USD accounting gain for Repsol. Sinopec Group, as the company is known, holds 40 percent of that division.