Repsol Earnings: Shareholder Payout Increases Continue Despite Earnings Decrease

Repsol’s REP third-quarter adjusted earnings fell to EUR 1.1 billion from EUR 1.5 billion a year ago, largely on lower oil and gas prices. Operating cash flow fell to EUR 1.3 billion from EUR 3.2 billion the year before, while capital spending grew to EUR 1.3 billion from EUR 962 million. Management reiterated its plan to make EUR 5 billion of organic investments in 2023 and to allocate 35% of organic investments in the year to low-carbon projects, a total of EUR 1.75 billion.

Repsol paid a dividend of EUR 0.35 per share during the period. Management reiterated its intention to return EUR 2.4 billion to shareholders during the year through a combination of dividends and share repurchases, good for a 30% payout ratio, on the upper end of the guidance range. Management also announced a dividend increase to EUR 0.40 per share starting in January 2024, a 14% increase.

Net debt including leases fell to EUR 1.9 billion from EUR 2.2 billion a year ago but more than double from the second quarter mainly due to the acquisition of own shares, the payment for the Maxus litigation, and the second payment of the Spanish windfall tax. The net debt/capital ratio increased to 5.9% from 2.8% but remains at the lower end of the peer group range. Our fair value estimate and moat rating are unchanged.

Upstream segment adjusted earnings fell to EUR 341 million in the third quarter compared with EUR 753 million a year ago on lower oil and gas prices. Production rose to 596,000 barrels of oil equivalent a day from 549 mboe/d last year, primarily due to the commissioning of new wells in the unconventional assets of Eagle Ford and Marcellus in the U.S. Production in the fourth quarter will need to exceed 596 mboe/d to reach production guidance for 2023 of 600 mboe/d, which management confirmed.