Repsol Sa Sp/Adr

Good morning to all. Welcome to REPSOL's fourth quarter and full year 2024 results presentation. Today, our conference call will be hosted by Joshua Yonimath, our chief executive officer, with other members of the executive team joining us as well. Before we start, let me draw your attention to our disclaimer. During this presentation, we may make forward-looking statements based on estimates. Actual results may differ materially depending on a number of factors as indicated in the disclaimer. I will now hand the conference call over to Josuyon.

Thank you, Pablo. Good morning to everyone and thank you for joining us. Today I'll take you through the numbers and main messages that explain our 2024 performance and the outlook for 2025. As usual, after the presentation, I'll be and we will be available for a Q&A session. One year ago, we shared with you our strategic update to 2027, setting the basis that will help us consolidate Repsol's multi-energy proposal. Today, 12 months later, we can affirm that 2024 was a positive year for us. a year in which we made material progress towards the execution of the strategy founded on a solid performance across the businesses. Operating under the capital framework of our plan, we successfully fulfilled our remuneration commitments, prioritizing shareholder payouts, maintaining a strong balance sheet while investing in profitable growth. Bolstered by our robust fourth quarter, we achieved an adjusted income of 3.3 billion euros and delivered 6.3 billion euros of operating cash flow ahead of our latest guidance before accounting for the Sinopec transaction. Total shareholder remuneration amounted to 1.9 billion euros, equivalent to 31% of the operating cash flow. The cash dividend was increased by approximately 30% to 90 cents per share, and we redeemed 60 million shares, equivalent to 5% of our share capital at the beginning of 2024. Over the last three years, Repsol has canceled an equivalent to 24% of its share capital. Net debt closed at 5 billion euros, a half billion reduction compared to September, The GIDIN ratio, including leases, closed at 14.7%, and excluding the 4.3 billion euros of leases accounted in a reported net debt, the GIDIN stood at 2.4%. Total liquidity stood at 9.5 billion euros, more than 3.5 times our short-term debt. Net capex after disposals and asset rotations was 5.7 billion euros, but this figure didn't include the second installment for the disposal of Colombia of 0.3 billion that will be posted in the first quarter of 2025. The investment level in 2024 reflects the higher development activity of the first part of our strategic plan, mainly associated to the FIDs taken in the upstream over the past few years and the implementation of low carbon projects as an indication of the capex intensity reduction that we anticipate for coming months the fourth quarter of 2024 registered the lower quarterly capex of the year both gross and net in that period i mean the last quarter of the year that traditionally has concentrated a higher share of absolves annual investment looking forward We remain committed to a net capex of 16 to 19 billion euros in the four years of our plan, with the net investment for 2024 and 2025 projected to reach a maximum of 9.5 billion euros. So it seems to me that we trend to be in the low range of the committed net capex of 16 to 19 billion euros that we anticipated for the four years of our plan. The group's capital expenditures are expected to normalize by 2026 once the investment peak of the upstream development cycle is complete. At the macroeconomic level, during 2024, the main drivers of the industry converge to more normalized levels notably the refining environment compared to the situation of the previous two years. These factors combine into what we see as a supportive market scenario with an oil price of more than $80 and with a refining margin indicator averaging $6.6 per barrel, higher than the historical trend. In the upstream division, full-year adjusted income was 1.5 billion euros, 16% lower year-over-year, mostly due to lower gas prices and lower volumes. Full-year production averaged 571,000 barrels per day at the lower end of our guidance. Production was impacted by divestments, forced mayoral events in Libya, and unadjusted activity in unconventionals in response to low gas prices. In the first quarter, we successfully divested our assets in Colombia, where we produced around 12,000 barrels of oil per day. An active management of our assets continues to drive the high grading of our portfolio, increasing cash flows, lowering break-evens, and reducing the carbon footprint of our production. Looking ahead, our organization continues to work on the preparation for a potential liquidity event. The development activity in 2024 stressed the efficient delivery of the key growth projects on time and on budget. Leon Castile in the Gulf will start production in August, contributing an average of 10,000 net barrels a day to 2025 production. And in Alaska, the first phase of PICA is planned to reach first oil before year end. Campus 33 in Brazil and Block 29 in Mexico continue progressing on Schedule 2, with both projects looking to initiate production in 2028. Our plans in Mexico were reinforced by the positive results of the Jopat 1 well. In Libya, once the last interruption was lifted in October, we managed to bring the field to its maximum production since 2020, and it has been running at peak levels since December. New exploration activities currently being carried out in Murzuk for the first time in 10 years. Ingur is a promising low-cost basin well known for Repsol since many decades ago. For 2025, we project an average production between 530,000 to 550,000 barrels per day. Let me say that we will be in the high range, in the high part of this range. But I mean, we always want to have some kind of flexibility in the unconventionals depending on prices. But it's true that, I mean, it seems to me that HeavyHub is going to perform in the right way this year. So I'm more comfortable saying that we will be in the high range, in the high part, sorry, of this range. The production is going to be impacted by the Columbia disposal. And as I mentioned before, the activity in unconventional depending on prices. The share of oil in our production mix is expected to increase compared to 2024 due to Libya and the startup this summer of Leon Castile in the Gulf. And in unconventional, our team continues to closely monitor natural gas prices in the U.S. with flexibility, as I mentioned before, to adapt operations if needed. We expect to resume drilling activities in both assets, Marcellus and Eagle 4, during 2024. And in our budget, we are assuming a heavy half price of $3, with roughly 55% of our North American gas volumes hedged through a non-cost collar structure between $3 and $6 per million BTU. In the industrial division, full year earnings reached 1.5 billion euros, roughly 1.3 billion lower year over year, mainly due to the normalization of the refining margins, but still solid thanks to the excellent performance of the trading businesses. The strong refining environment observed in 2022 and 2023 persisted in the first part of the year. Since April, however, margins declined until reaching their annual lows in August, mostly driven by weaker diesel and kerosene differentials. A combination of seasonal effects, higher op-ed supply, and run rate cuts allow for a partial recovery of margins as we approach the end of the year. The average margin indicator was 40% lower compared to 2023, mostly due to a weakening of metal distillates and, to a lesser extent, narrower gasoline differentials and a pricier Maya. The average premium over the indicator was $1.2, including a negative $0.4 impact due to the fraud practices that affected the Spanish fuel market in 2024. So that is the effect of FOB, CIF, depending on the export to internal market distribution of these products. The utilization of our distillation capacity was 88%, three percentage points higher year over year. The run rate of the conversion units reached 100% in line with 2023. And in our transformation projects last March, production started in our new SAF and HBO plant in Cartagena. In Puerto Llano, the current retrofitting of an existing gas oil hydrotreater produced HBO is expected to begin operations early 2026. So far, in 2025, the margin indicator has averaged around $5.5 a year, $5.6 a year to date. including $7.1 a barrel this month in February, as average. For the full year, we project an average indicator of $6 per barrel, based on the expectation of a higher demand and the new refining capacity being balanced out by announced closures, either in North America, Europe, and Asia. The average premium over the indicator is projected at around $2 per barrel in 2025. Demand for biofuels is forecast to recover during 2025, mostly due to the implementation and expansion of regulatory mandates. Anti-dumping measures on Chinese spurts could lead to a further strengthening of the HBO spread against the UCO. Lastly, the turnaround schedule for this year includes activity in the hydro treatment part of Bilbao, Porto Llano, and catalyst changes in Tarragona refinery. In the chemical business, Repsol's full year margin indicator was 3% higher compared to 2023, with sales staying in line year over year. And despite this relative improvement, the EBITDA contribution remains negative. For 2025, we expect to reduce our EBITDA break-even by half 15%, from 260 to around 220 euros per ton. That is because all the measures we are taking in terms of reducing costs, efficiency, improving feedstock in our chemical plants and so on, And moreover, we expect the new projects coming on stream, largely the expansion of CNES to contribute additional 100 to 140 million euros of a bit than coming years, depending on an acid or a central margin scenario. In circular economy, last month, we took the FID for the first gasification plant in Europe using urban waste to produce biomethanol. The facility will be located in Tarragona, in our petrochemical complex, and will start operations in 2029 and will reach a capacity of up to 240,000 tons per year of renewable methanol. And total investment will amount to 780 million euros, of which around 120, 130 million will be deployed in 2025. project has received more than 130 million euros of funding from the european innovation fund and finally as we progress in 2025 we expect to advance in the approval process of three electrolyzers one in cartagena one in bilbao and the third one in tarragona all three have been selected to receive public funding in the case of tarragona electrolyzer will support the economics of the gasification plant just approved thanks to a higher methanol yield and lower CO2 footprint. These FIDs will allow us to achieve something in between 0.6 to 1.2 gigawatts of renewable hydrogen capacity by 2030 of which 350 megawatts correspond to the hydrogen produced in the steam reformers from biomethane. We are adjusting our roadmap due to the delay in the market development and the evolution of the regulatory framework and public funding. So we are prioritizing return and balancing the capital allocation over any capacity targets. so we will face down from 1.9 gigawatts in 2030 previously announced to the range of 0.7 1.2 gigawatts roughly speaking we are now in some way facing that in the customer division full year adjusted income was 659 million euros 7% over 2023, mainly due to higher results in service stations, aviation and power and gas retail. The accumulated EBITDA to December reached 1.2 billion euros, a historical figure in Repsol, a 13% improvement year over year, and on track to deliver the 1.4 billion targeted for 2027 in this division. In the mobility business over recent months, we start to see the results of the anti-fraud regulatory measures and control mechanisms adopted in Spain. This, let me use the term, stabilization of the market enabled us to increase our sales of road transportation fuels by 6% in the fourth quarter compared to the same period in 2023. The number of digital clients reached 9.3 million by the end of 2024, a 17% increase over the previous year, contributing to an increase of business-to-consumer sales in service stations. In power and gas retail, we had more than 330,000 clients in 2024, reaching the record figure of 2.5 customers. No, not 2.5. 2.5 million customers by the end of December. This increase was fully organic and self-financed, allowing the business to generate a positive free cash flow to the group. So we are growing in this business, having clients, and at the same time generating free cash flow. And that is, let me say, a consequence of this integration business in the power view we have in Rexall integrating the low carbon generation and the customer side. Furthermore, Repsol's growth in 2024 has been the highest for unknown incumbent power and gas commercialization company in Spain since the complete liberalization of the electricity sector in 29. Finally, low carbon generation for year adjusted income was 23 million euros negative, 98% million lower year over year, mainly due to a lower contribution from CCGTs and renewables. This result is explained by a lower production in the combined cycles, the negative impact of elevated levels of hydropower generation in Spain, and the contribution from equity affiliates. The lower result also reflects the cost associated with the integration of ConnectGen and the development of our renewable growth platform. This platform is prepared to operate an extensive pipeline of three to four times our current generation capacity, but in this phase is supporting the cost of this development and this growth. The average pool price in Spain was 63 euros per megawatt hour, 28% below year-over-year. The total power generated by Repsol reaches 7.8 terawatt-hours, including 5.9 in Spain and 1.4 in the U.S. The startup of FRI solar project in the U.S. and of several projects across Spain allow Repsol to reach 3.7 gigawatts of renewable capacity under operation by year-end. Repsol's global wind and solar generation increased by 67% year-over-year. In 2025, we plan to add more than 1.0 gigawatts of new generation capacity. 500 megawatts will be added in Spain and 1.1 in the U.S. and Chile, mainly as the outposts and Pennington solar projects in Texas reach full commercial operations. Capital optimization will continue through our active asset rotation model to finance new investment and reduce our risk. One rotation in the US and another in Spain are in their final stages, expected to be announced soon. Our deep development pipeline allows us to select the best projects, prioritizing returns and minimizing financial exposure. By 2027, we expect to be at a maximum of nine gigawatts of assets in operation, comparing with the range of nine to 10 gigawatts that was the strategic range of generation capacity. Finally, we are also exploring opportunities to increase our returns by leveraging on the development of data centers, Yesterday, we were granted with 402 megawatts of interconnection capacity for this development of data centers in the northeast part of Spain, in Aragon. So we are going to benefit from our large project expertise and the synergies with our generation assets. Moving now to the financial results. In this slide, you may find a summary of the figures we have discussed today. Regarding the Green 4 tax in Spain, the cash impact in 2024 was €335 million. This was the last payment related to this extraordinary tax, as the proposal for its extension was not ratified by the Spanish Parliament some weeks ago. For further details on our results, I encourage you to refer to the complete set of documents released this morning. Let me highlight that the 2024 integrated management report has already been drafted according to the requirements of the new European sustainability reporting standards, anticipating the transposition of the corporate sustainability reporting directive to the Spanish legislation. In addition, and aligned with stakeholders, requests over these years. This year we have also substituted the previous target of achieving a 30% reduction in absolute scope one, two, and three net emissions by 2030 with a new target of achieving by 2030 a 20% reduction in absolute scope one, two, and three emissions based on products sold and with no consideration of avoided emissions. You know, we have had, let me say, a deep discussion over years about this concept, but finally we are delivering this information related to this criteria that, let me say, most of you were defending. This further reaffirms the consistency of our decarbonisation pass with the objectives of the Paris Agreement and the global ambition of Net Zero 2050. Moving on to our outlook for 2025, we are assuming an oil price of $75, with $3 of Henry Hub, $6 of Refining Margin Indicator, generating between $6 and $6.5 billion of cash flow from operations. We expect a net capex between 3.5 and a maximum of 4 billion euros, and we are including here the refacing of hydrogen and the renewables investments. This figure also includes the closing of the Bungie acquisition expected next month after receiving all the required authorizations. This level of net capex will enable us to start up Leon Castile, and Alaska this year, to progress in Campus 33 in Brazil, to conclude our chemical differentiation projects, mainly CNES, to complete the advanced fuels unit in Porto Llano, I mentioned before, and to launch the EcoPlanta, this classification unit using urban waste, and these 300 megawatts of electrolysis capacity I mentioned before. All of these together with the objective for reaching 5.2 gigawatts of renewable capacity and increasing our customer base in the power business. In terms of remuneration, in 2025 Repsol will distribute a cash dividend of 0.975 euros per share, an 8.3% increase over 2024, complemented with a minimum share buyback of 700 million euros to reduce capital. This will put total shareholder distributions at 30 to 35 percent of the cash flow from operations, again, at the higher end of our 25 to 35 percent strategic distribution range. Aligned with this, the Board of Directors approved yesterday to propose to the next AGM, a capital reduction of shares to be acquired for an equivalent amount of 350 million euros to be executed before the end of July. I mean, with 300 million to be acquired through a share buyback program, and a reminder, 50 million through the settlement of currently existing derivatives. In conclusion, Repsol is evolving, grounded on its competitive advantages and the organization is transforming while we continue investing and optimizing the traditional businesses. Repsol completed last year a solid start to its strategic horizon in 2027, setting a framework for sustainable and profitable growth. We deliver a resilient, strong set of results and operating cash flow, cash is king, keeping debt under control and meeting our remuneration commitments. We look confident into 2025, confident on the execution of our strategy, and confident in our capacity to adapt our roadmap to changes in the market environment. Assuming a prudent macro scenario, this year we expect to generate a similar level of operating cash flow than in 2024, increasing the distribution to shareholders according to our plan. Net debt will remain in check, reinforced by a lower net capex and within the full boundaries of our financial frame. We maintain our broad objectives on the energy transition, adopting new metric standards as requested by our stakeholders. And we continue believing in a profitable transformation with focus on improving our upstream portfolio improving the barrels we produce, decarbonizing our industrial hubs, developing new low-carbon commercial businesses that are growing, and giving us an additional cash flow from generation coming, cash flow from operations, sorry, coming from these businesses, and at the same time, increasing our renewable generation capacity. So with this, I will turn it over to Pablo as we move on to the Q&A session. Thank you very much.

Thank you, Yasuyun.