| Preview of Income Statement, 2nd quarter of 1996 |
| 1. INTRODUCTION 1.1.- Results Repsol's net income for the second quarter of 1996 was 26,048 million pesetas, 11.4% lower than that for the same period in 1995. Net income for the half-year was 61,454 million pesetas, 1.1% below the 62,163 million pesetas obtained last year. This stable income was achieved over a period marked by the cyclical nature of the chemical area, which registered operating figures three times lower than those for the first half of 1995, although there was considerable improvement in the second quarter. Operating income for the period reached 42,927 million pesetas against 49,958 million pesetas for the second quarter of 1995. Operating figures for the first half of this year were at 96,046 million pesetas, showing a 13.8% drop on those reported a year earlier. Net cash-flow for the second quarter fell by 2.9% against last year to 56,114 million pesetas, whilst first half cash-flow was 2.1% lower, at 122,300 million pesetas. Investments over the first three months of 1996 amounted to 58,092 million pesetas, and for the first half of the year, to 106,857 million pesetas, in comparison to a capital expenditure of 78,170 million pesetas in the first six months of 1995. Net debt at the end of the period was 248,418 million pesetas, whereas this was 201,589 million pesetas at the same date last year. 1.2.- Business Environment The following circumstances have affected our activities over the past quarter:
1.3.- Expansion in Latin America Apart from the above, two outstanding operations were completed during this quarter, which will strengthen the company’s presence in Latin America.
2. ANALYSIS OF RESULTS BY ACTIVITIES2.1. Exploration and productionOperating income for this activity rose during the second quarter by 31.6% over the same period last year, to reach 6,149 million pesetas, and was 41.7% higher than the first quarter of 1996. For the first half, operating income amounted to 10,487 million pesetas, in comparison with 9,859 million pesetas a year earlier. Operating cash-flow for the quarter was 13,096 million pesetas and for the first six months was 23,968 million pesetas, against the 1995 figures of 10,123 million pesetas and 21,717 million pesetas respectively for the same periods. Higher crude oil prices and a stronger dollar against the peseta boosted income for this quarter. Production, at 2.39 million tonnes of oil equivalent (Mtoe), was 4.8% lower than the second quarter of last year. Decrease in production from traditional areas, such as Dubai and Egypt, has not yet been counterbalanced by the start-up of production at new fields in the United Kingdom and Spain. The Harding field went on-stream at the end of last April, although production was not significant until June, when 30,000 barrels of oil per day (bpd) were produced. A ceiling of 60.000 bpd is expected by the end of 1996, once producing wells have been drilled. 15,000 net bpd of this will pertain to Repsol. The field holds 185 million barrels of oil and 200,000 million cubic feet of gas in proved recoverable reserves. The overall cost of installations and producing wells at under 3.5 $ per barrel is one of the lowest in the North Sea. The Rodaballo field went into production at the end of May. This field is near the Casablanca off-shore rig at Tarragona and will prolong the latter’s production span. Repsol is operator, with a 69.42% stake and production is expected to last five years, at an initial rate of 3,500 bpd. Recoverable reserves are estimated at 2.8 million barrels of oil, and total investment for the project amounts to 6 million dollars. 10,978 million pesetas were invested over the second quarter of 1996, as opposed to 8,600 million pesetas in 1995. Accumulated investments over the first half amounted to 19,543 million pesetas: 4,150 million pesetas of this was spent on exploration and 15,240 million pesetas on development. 2.2. Refining and Marketing Quarterly operating income was 16,735 million pesetas, 26.6% up on the same period last year. Accumulated income for the first half of 1996 was up 25% at 36,984 million pesetas in comparison to 26,638 million pesetas in 1995. Refining income benefitted from improved margins, which rose by around 35 cents per barrel over the first quarter of this year. CLH transported 1.9% more light products over the second quarter of 1996 than it did a year earlier, reaching a figure of 12.6 million Mt. by the end of June, and registering a growth of 3.2% in this activity. This confirms the extensive use of the CLH grid by a vast majority of operators. However, there were two specific aspects which negatively influenced the income statement for refining and marketing, pushing results lower than those for the first quarter of 1996:
Higher sales of medium distillates on the domestic market, which rose by 6.6%, were not sufficient to compensate for the drop in sales of other products and markets, partly due to higher rainfall this year and the company’s long term policy on margins in easily recoverable channels. The aforementioned, together with a lower distillation rate, resulted in an 8.6% fall over last year in total sales for the quarter, at 6.7 million tonnes. Investment outlay during the half-year was 43,065 million pesetas, in comparison to 39,454 million pesetas for 1995. Most of this outlay was dedicated to linking up service stations. By the end of June, 74% of the service station network held long-term links with the Repsol group. 2.3 Chemicals Operating income from chemicals for the second quarter of the year was 7,563 million pesetas, showing a drop of 64.4% against the period last year, but a 35.9% rise over the first quarter of 1996. Accumulated income for the first half of 1996 was 13,127 million pesetas in contrast to 41,337 million pesetas registered in 1995. Margins on main petrochemical products were slightly better than those for the first quarter of this year. Whereas gross margins on plastics were clearly higher than in the first quarter, those on base petrochemicals - fundamentally ethylene - were lower. Margins on intermediate products also diminished, some of them, for example styrene, reaching an all-time low. Petrochemical sales over the three month period fell by 4.4% to 460,000 Mt. A 25 day shut-down at the Puertollano cracker causing an estimated loss of 400 million pesetas, the absence of economic revival in Germany and the stagnation of private consumption in Spain were the main causes of this situation. In addition, the pre-marketing campaign for polypropylene (PP), prior to the start-up of the PP plant in Tarragona, suffered a delay. Investments for the quarter rose by 167.8% against year earlier expenditure, reaching 4,068 million pesestas. Accumulated outlay for the first half was 8,601 million pesetas in comparison to 2,344 million pesetas in 1995. As we have already informed in previous reports, main projects here are the new polypropylene plant, a cogeneration unit at Tarragona and re-vamping of plants producing low density polyethylene at Tarragona and polypropylene at Puertollano. The companies, Poliplastic and Reposa, were divested. 2.4 Gas Second quarter operating income for the gas activity was 12,752 million pesetas in comparison with 12,845 million pesetas last year. Accumulated half year income rose by 9.6%, to 35,981 million pesetas. These quarterly figures result from a 6.2% drop in LPG operating income, which was 5,654 million pesetas, and a 4.1% rise in natural gas income, which reported 7,098 million pesetas. Repsol Butano operating profit included over 200 million pesetas in provisions for manpower adjustment to cover the closure of several factories. The Gas Natural income statement similarly includes provisions for more than 500 million pesetas to compensate for losses caused by the time lag between prices of supplies and selling prices. Total LPG sales were 3.7% lower than in the same quarter a year earlier because of lower trading activity and sales to the petrochemical market. Bottled LPG sales rose by 1.1%, and demand for the "Tailor-made Plan" and piped gas continued to grow. The positive impact of higher margins on feedstocks over the quarter was unable to compensate for this sales’ evolution, especially whilst the price formula for setting LPG price ceilings maintains the term regarding distribution costs. Sales of natural gas reached 12,223 million thermies in the second quarter, showing a 4.6% growth over the same period of 1995. These break down into 2,836 million thermies to the residential-commercial sector (with a 1.9% rise) and 7,837 million thermies to the industrial market (with a 9.4% rise). Overall first-half investments in the activity were 73.7% up over 1995, at 34,612 million pesetas. 4,075 million pesetas were spent on the LPG area (11.2% up over 1995), and 30,537 million pesetas on the natural gas sector (87.8% higher than a year earlier). 23,070 million pesetas of the latter went to transmission infrastructure and the remainder to distribution networks. In June, last, approval was obtained for the construction of an LNG plant in Trinidad and Tobago (Atlantic LNG), with an overall investment estimated at 1 billion dollars. This plant will have a capacity for 3 million tonnes of LNG per year (equivalent to 400 million cubic feet of gas per day), and its commercial exploitation is expected to start in October, 1999. Repsol has a 20% stake in the project. Atlantic LNG’s customers are the American company Cabot (60%) and Enagas (40%). Net financial expenses for the second quarter of 1996 were 1,275 million pesetas, in contrast to the 2,324 million pesetas registered a year earlier. This evolution is a consequence of two factors:
The second quarter of 1996 reported an extraordinary loss of 394 million pesetas, mainly to cover provisions for manpower adjustment programmes and potential losses in various companies, amounting to 1,311 million pesetas, partially offset by profit obtained from the divestment of Poliplastic and other fixed assets. Goodwill amortization for the three month period included 283 million pesetas of goodwill amortization on the corporate reorganisation of gas companies Income tax at June 30th, 1996 was calculated at 28,082 million pesetas, and represented an effective rate of approximately 30%. REPSOL SUMMARISED INCOME STATEMENT(Million pesetas)- NON -AUDITED FIGURES-
_________________________________________ ANALYSIS OF REPSOL OPERATING INCOME BY ACTIVITY(Million pesetas)- NON -AUDITED FIGURES-
_____________________________________ ANALYSIS OF REPSOL OPERATING REVENUES BY ACTIVITY(Million pesetas)- NON -AUDITED FIGURES-
_____________________________________ ANALYSIS OF REPSOL INVESTMENTS BY ACTIVITY(Million pesetas) - NON -AUDITED FIGURES-
_____________________________________ REPSOL COMPARATIVE BALANCE SHEET(Million pesetas)- NON -AUDITED FIGURES-
REPSOL CONSOLIDATED STATEMENTS OF CASH FLOWS FIRST HALF - 1995 AND 1996(Million Pesetas) - NON -AUDITED FIGURES-
OPERATING HIGHLIGHTS- NON -AUDITED FIGURES-
___________________________________________________ ANNEX: Restructuring of Repsol's management bodies Madrid, August 29, 1996 |
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