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Repsol 1Q Net Profit Rises 8.2 Percent

Posted on: Thursday, 11 May 2006, 18:02 CDT

MADRID, Spain - Spanish-Argentine oil and gas company Repsol YPF said Thursday its net profit rose 8.2 percent in the first quarter, amid concern that the nationalization of Bolivia's energy industry could affect reserves and further erode declining oil and gas production.

Repsol's net profit increased to 862 million euros ($1.1 billion) in the first quarter of 2006 from 797 million euros in the same period of 2005, the company said.

Adjusted net profit - excluding nonrecurring items - increased 7.5 percent in the first quarter to 844 million euros ($1.08 billion), up from 785 million euros in the first quarter of 2005. The figure excludes 18 million euros ($23 million) in one-time payments.

But uncertainty over the impact of Bolivian President Evo Morales' nationalization of the energy industry and a recent reserve downgrade weighed more than the results, analysts said.

"Repsol has underperformed the European majors by 13 percent year-to-date," Merrill Lynch said in a brokerage note. "Both the January reserves downgrade and the recent crisis in Bolivia highlight that the core exploration and production business remains constrained in terms of both growth and access to resources."

The sixth-largest European oil and gas company by market capitalization said in February that there would be no further downgrades beyond the 25 percent cut in reserves the previous month. Repsol reduced its proven reserves by 1.254 billion barrels of oil as of Dec. 31, 2005, primarily related to natural gas reserves in Bolivia and Argentina.

But while the impact of Bolivia's nationalization is still unclear, an official with the country's state energy company Yacimientos Petroliferos Fiscales Bolivianos, or YPFB, hinted foreign companies will have to partially downgrade their reported proven reserves and production coming from the country.

"Companies presumably will have to adjust their reports to reflect YPFB's 100 percent ownership" of the energy industry, although "companies will get a percentage," said Manuel Morales, a senior adviser to YPFB's chairman.

Foreign companies have six months to negotiate their contracts or leave the country.

While less than 2.5 percent of Repsol's net profit in 2005 originated in Bolivia, about 18 percent of the company's booked proven reserves and about 11 percent of its production came from that country. Repsol, along with Brazil's state-run Petroleo Brasileiro SA, or Petrobras, is Bolivia's biggest foreign investor, having invested more than 1 billion euros ($1.28 billion) since 1997.

Repsol's exploration and production operations suffered from another consecutive quarter of declining output in the first three months of the year. Overall production dropped to 1.1 million barrels of oil equivalent a day, or 2.6 percent less than in the same period the year before.

Within the total figure, crude oil production decreased 6.1 percent in the first quarter from the same period the year before, due mainly to Repsol's maturing Argentine wells, while gas production edged up 0.6 percent.

Repsol shares fell 1.2 percent to close at 22.31 euros ($28.51).

Source: Associated Press/AP Online

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