Lower Libya Production Weighs On Repsol YPF Earnings

Spanish oil company Repsol YPF SA (REP.MC) said Wednesday its fourth-quarter net profit declined 90% on-year, thanks largely to extraordinary gains in the 2010 quarter from the sale of a stake in the company's Brazilian unit.

Lower production in Libya, where operations restarted in the quarter after ceasing for the duration of that country's civil war, also weighed on results. Repsol, which operates in 35 countries, said net profit for the three months to Dec. 31 was EUR292 million, down from EUR2.91 billion.

Replacement-cost-adjusted net profit, the figure most closely watched by analysts because it strips out volatile swings in the value of inventories, fell 28.9% to EUR355 million from EUR499 million a year earlier. It came in below the EUR384.2 million consensus estimate from a FactSet poll of 13 analysts.

Sales for the quarter totaled EUR16.21 billion, down slightly from the year-earlier EUR17.44 billion.

The company's overall oil and gas output declined 14% to 292,000 barrels of oil equivalent a day in the quarter, from 341,000 barrels of oil equivalent a day a year ago, mainly due to the production stoppage in Libya.

Wednesday, Repsol indicated that production in Libya appears to be recovering much faster than expected, and is now at about 300,000 barrels of oil-equivalent a day, close to pre-war levels. Late last year, Repsol executives predicted that gross production in the first quarter would be a little more than half that level.

Although the temporary drop in Libyan production in 2011 would have helped somewhat boost the rate that Repsol replaces its reserves, exploratory success in Brazil, Africa and elsewhere largely accounted for Repsol's 162% reserves-replacement ratio, a steep increase from the 131% ratio in 2010.

The replacement rate for Repsol's Argentina division, YPF, climbed to 112% in 2011 from 84% in 2010, the company said. That indicates that YPF is booking reserves faster than it consumes them at a time when the Argentine government is reportedly considering nationalizing the company in part on the back of a belief that YPF isn't investing enough in production.

For the full year, Repsol's net profit declined 53% to EUR2.19 billion, while the adjusted net profit decreased 5.4% to EUR1.92 billion. Revenue increased 5.4% to EUR63.73 billion.

At 0842 GMT, Repsol shares were down 1.1% at EUR20.3, valuing the company at EUR24.8 billion. The shares were underperforming Spain's IBEX-35 blue-chip index, up 0.8% at the time.

(Source: Wall Street Journal)

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