MADRID (Dow Jones)--Spanish oil firm Repsol YPF SA (REP) Thursday said its net profit, excluding inventory effects, surged 60% in the second quarter, lifted by higher prices at the pump in Argentina, recovering refining margins and higher oil prices. Repsol's replacement cost adjusted net profit in the second quarter rose to EUR523 million, from EUR326 million during the same period a year earlier. That topped an average forecast of EUR485.8 million in a Dow Jones Newswires poll of six analysts. The adjusted profit figure is the one most closely watched by analysts because it strips out often volatile swings in the value of inventories.
At 0950 GMT, Repsol shares traded about 1.4% higher at EUR18.50.
Repsol benefited from a nearly fivefold increase in income at the Argentina unit YPF, mainly driven by a rise in domestic fuel prices both in local currency and in dollars. Argentina's government last year allowed an increase in regulated prices at the pump, which it had previously kept artificially low.
YPF's recurring operating profit soared to EUR441 million in the second quarter. The surge in profits from Argentina ironically comes as Repsol plans to further reduce its stake in YPF--now at about 84%--to lessen its exposure to Argentina.
The good result at YPF actually "makes it more attractive for investors," said ING analyst Jason Kenney. "Repsol can't continue with so much dependence on one single place."
The company has postponed the sale of a further stake to either institutional investors or on stock markets due to adverse market conditions.
Oil and gas production in Argentina, however, fell 7% to 556,000 barrels of oil equivalent a day, as output in the country's mature fields continued its natural decline.
That pushed the overall oil and gas output of YPF and Repsol's other units down by 4.5% to 896,000 barrels of oil equivalent a day.
Repsol's unadjusted net profit in the second quarter was EUR650 million, versus EUR434 million a year earlier.
The company's earnings before interest, taxes, depreciation and amortization, or Ebitda, rose to EUR2.47 billion in the second quarter from EUR1.62 billion in the same period a year earlier.
Repsol's recurring income from exploration and production more than doubled to EUR370 million amid a 32% rise in Brent crude prices to an average of $78.2 a barrel in the second quarter compared to the year-ago quarter.
Repsol also got a big boost from refining, as refining margins in Spain strongly recovered to $3.3 a barrel in the second quarter from only $0.5 a barrel a year earlier.
The company's replacement cost adjusted operating profit in its downstream unit more than tripled to EUR369 million. The unit includes Repsol's refining, marketing, chemicals and liquefied petroleum gas businesses.
Repsol is scheduled to hold a conference call on earnings at 1400 GMT. Observers will likely look for updates on the potential initial public offering of part of Repsol's Brazilian assets and on the planned further sell-down of its YPF stake.
Company Web site: http://www.repsol.com
-By Bernd Radowitz, Dow Jones Newswires, +34-91-395-8125, This e-mail address is being protected from spambots. You need JavaScript enabled to view it
Source: http://online.wsj.com/article/BT-CO-20100729-707639.html
