Analyst Note| Allen Good, CFA |
Repsol’s third-quarter adjusted earnings increased to EUR 1.5 billion compared with adjusted earnings of EUR 623 million a year ago, largely on higher oil and gas prices and stronger refining margins. Operating cash flow more than doubled to EUR 3.2 billion from EUR 1.4 billion the year before while capital spending grew at a slightly lower rate to EUR 962 million from EUR 573 million last year. Management anticipates its 2022 spending to be on the upper end of its midyear EUR 3.8 billion-EUR 4 billion guidance and maintained its plans to distribute 25%-30% of organic operating cash flow. Repsol announced it is increasing its cash dividend to EUR 0.70 in 2023, an increase of 11% from the previous year. In addition, Repsol plans to repurchase an additional 50 million shares by year-end, thus accomplishing its 2021-25 redemption target of 200 million shares three years in advance. Our EUR 15 fair value estimate and no moat rating are unchanged.