In a scenario of oil prices (Brent) at $35 and Gas (Henry Hub) at $1.8, Repsol has drawn up a contingency plan to deal with the impact of COVID-19. This includes cancelling the extra share buyback for 5% of capital due to be executed in May, which, totalled 1Bn euros, but maintaining its dividend at €1 per share. The company also flags that it has sufficient liquidity to deal with this situation at least until 2024.
Brent crude oil is trading at $36 a barrel, down 20%, after OPEC and Russia broke off negotiations on Friday to try and cut the supply by 1.5 million barrels a day. At these levels, it completely breaks through the level indicated by the sector as break even, namely 45-55 dollars. Banco Sabadell analyses the sensitivity of the stocks they cover to variations in crude prices: Repsol, Total and ENI.
Repsol will make a provision of 837 million euros, representing 4% of its market cap, in its 2019 results after the first partial award (of a total of five) issued by the Arbitration Court in 2020. This has been found in favour of Addax and Sinopec in their litigation against Talisman Energy (currently “ROGCI”) and Talisman Colombia Holdco Limited.
Morgan Stanley | Global refinery margins have fallen sharply this year and we think we are going to see a rebound in 2020 for a host of reasons: the price of HSFO has fallen to a level where it already competes in power generation, which limits its fall from these levels.
Repsol expects to adjust the accounting value of some assets, with a post-tax accounting charge of approximately 4.8 billion euros in order to achieve net zero emissions by 2050. This adjustment will reduce specific reported income for 2019 but does not alter the company’s cash flow for the year nor the announced proposal to increase shareholder remuneration.
Bankinter | Repsol has published weak results for 3Q19. Principal figures compared with the consensus (Bloomberg): Ebitda 1.597 Bn€ (-21%); adjusted NAP 522 M€ (-11%) vs 529 M€ estimated (Bloomberg); Net Profit 333 M€ (-47%).
Renta4 | The oil company has returned to the market for the first time since May 2017, closing an issue of 8 year bonds for 750 M€ at a price of 99.684% and fixed annual coupon of 0.25%, whose trading admission will be sought in the Luxembourg stock market.
Bankinter | Recomendation Buy and Objective Price 17,4€/share. The rise in oil prices and growth opportunities will drive the share price. Repsol will be driven by exogenous (the sharp increase in oil prices benefits it directly – Brent YTD +39%) indigenous factors.
Morgan Stanley | With oil up 30% YTD, fairly decent quarterly figures, dividends easily covered, with potential to grow and clearly above a market without upside, and with a process of positive profit revisions, we insist in dedicating half an hour to two ideas which are now being oversold and which have lost all they gained in Q1 and which their high dividend is clearly attractive in the market and which we believe could have returns of around 10% in the relatively short term.
Renta 4 | Repsol Downstream investors’ day showed not only the firm’s resilience but also its capacity for future growth. We recall that within its growth target for operational cash flow from 4.6 Bn€ in 2017 to 6.5 Bn€ in 2020 at 50%/b, Downstream cash flow would grow 800 M€: 300 M€ from international margins, 200 M€ from improvements in profitability from greater efficiency and 300 M€ from expansion and new low carbon business preparing for the energy transition.