Repsol’s First-Quarter Losses: Navigating the Challenges of Lower Fossil Fuel Prices and Reduced Refining Margins

Repsol, the largest Spanish oil company, reported a net loss of 67 million euros in the first quarter of 2023, which was a 98.5% decrease compared to the same period in 2023. The adjusted result, measuring operating performance, was -514 million, a 97% decrease. This decline is attributed to the drop in fossil fuel prices, particularly natural gas, and lower refining margins, which have been key factors in their recent financial performance.

The company’s net debt decreased to 3,897 million due to the sale of non-core assets and dividends paid out. Despite this decrease in leverage, liquidity remains strong at 10,354 million, covering nearly four times all short-term debt maturities. The business segments within Repsol showed heterogeneity, with exploration and production of crude oil and gas recording a profit of 436 million despite various factors including the price of gas and recent divestments.

The industrial area, including refineries, saw an increase in profits to 1041 million due to higher refining margins and increased sales volumes. The client segment involving fuel and electricity marketing achieved an adjusted profit of 167 million slightly higher than before due to higher sales volumes. Low-carbon generation also recorded positive figures amid challenges in the wholesale electricity market in Spain due to new regulation on emissions trading that has boosted demand for cleaner sources of energy such as wind and solar power.

Repsol increased investments in renewables by more than double from last year’s budget to €1 billion; representing around half of its total investments this year. The company has committed to investing between €16 billion and €19 billion between 2022 and 2027 with a majority allocated to Spain’s Iberian Peninsula where it aims to expand its portfolio by acquiring new projects or increasing its stakes in existing ones while reducing its dependence on fossil fuels.

Repsol recently distributed dividends worth €4 per share as well as started a share buyback program worth up to €5 billion enhancing indirect remuneration for investors and supporting its financial strategy amidst changing market conditions.

In conclusion, Repsol’s first-quarter results indicate that despite facing challenges from lower fossil fuel prices and reduced refining margins