Repsol reduces debt as higher oil prices drive profit, cash

MADRID (Bloomberg) -- Repsol SA said rising crude prices drove up third-quarter profit, helping the Spanish oil and gas producer curb its debt burden.

Key insights

Repsol’s focus on debt reduction suggests a cautious approach to surging crude, much like its peers Total SA and Equinor ASA. So far, only BP Plc has embraced high oil prices by spending its additional cash flow. The company’s seeking to keep debt low as they focus on diversifying into electricity production and cutting reliance on fossil fuels. It’s an endeavor that requires resources for acquisitions, such as the purchase of power generator Viesgo earlier this year and solar project Vadesolar Hive in September.

Market reaction

Repsol shares rose 2.3% to 15.52 euros at 9:22 a.m. in Madrid. The stock is up 5.2% this year. “Good upstream delivery supported by Libya,” said Banco Santander SA analyst Jason Kenney, who has a hold recommendation on the stock. “This is offset by downstream which is below expectations on weaker chemicals, refining and LPG.”

Know more

Repsol’s adjusted net income climbed to 588 million euros ($667 million) in the third quarter from 528 million euros a year earlier, the company said. That was in line with the 590 million-euro estimate of 13 analysts. Net debt dropped to 2.3 billion euros, down from 6.8 billion euros a year ago. Earnings at the downstream division fell 33% to 336 million euros. The unit played a key role during crude’s three-year slump, but is now suffering from rising costs as prices rebound. Oil and gas output averaged 691,000 boed, little changed from a year earlier as higher crude production in Libya and other new projects offset declining gas production.