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Repsol SA reported worse than expected second quarter results Thursday due to higher chemical costs hurting downstream earnings despite higher refining margins. Upstream delivered $REPYY, Spain's oil major producer is seeking to diversity away from oil.

 Repsol Upstream

Repsol S.A.(NYSE: $REPYY) Missed Earnings Forecasts Before Open Thursday

Net Income of EUR 549 Million Missed $576 Million Forecast

Earnings

Adjusted second-quarter net income rose to 549 million euros ($643 million), from 496 million euros a year earlier, but missing estimates of 576 million euros. The company’s refining margin rose to $7.20 per barrel in the second quarter, from $6.60 per barrel a year ago, even as crude prices rose 14 percent during the three months through June. However, overall the downstream unit was impacted by higher costs for chemical production.

Repsol S.A. (ADR) ADR Class A NYSE: $REPYY 

Market Reaction > Pre-market 19.45 −0.32 (-1.27%)

Highlights

  • Hydrocarbon production rose 6 percent, reaching an average of 724 thousand barrels of oil equivalent per day.
  • Earnings from exploration and production increased by 91 percent due to efficiency measures and rising international prices.

Diversification

Repsol is looking to use funds from the sale of its 20 percent stake in Gas Natural SDG SA,  known as Naturgy earlier this year, Repsol is seeking to diversify away from oil production last month announcing the acquisition of power assets from Viesgo for about 750 million euros.

Earlier this week, Repsol also said it was buying a 40 percent stake in lubricant maker Bardahl in Mexico, where it is also building a network of gasoline stations

Respol Capex

Outlook

Repsol is projecting a 19 percent increase in earnings before interest, taxes, depreciation and amortization between 2017 and 2020, the company said in June. Sustained oil prices above $50 per barrel will also increase dividend payments and ramp up Repsol’s spending to diversify away from oil production.

Source Repsol

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