Repsol Sa Sp/Adr

Good morning to all. Welcome to REPSOL first quarter 2025 results presentation. Today's 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 Josue Joniman.

Thank you, Pablo. Good morning to everyone, and thank you for joining us. I know that today is a busy day for you, for the analysts covering our sector, so I'll try to be as executive as possible. Our presentation will be focused on first quarter performance, but at this stage we can't overlook the sharp turn of events in April, and how Repsol visualizes this complex environment. Of course, at the end, we will be available, as always, for Q&A sessions. Starting with the main messages, the first quarter of 2025 was marked by significant volatility driven by the headlines about OPIC's production policies, U.S. tariffs, and geopolitical tensions. Overall, the primary macro indicators were in line with our assumptions, enabling us a financial result consistent with guidance and to make material progress towards the priorities defined for 2025. Of course, all that volatility intensified in April, turning oil prices towards their lowest point in four years and deteriorating the refining environment. Repsol's integrated model has demonstrated resilience in similar situations, but nevertheless, the company is already working on adapting its plan if these circumstances persist. In this context, Repsol keeps advancing towards its strategic goals, having improved its upstream portfolio with a new venture in the UK, taking new steps on the development of its business model for renewables, and fulfilling its committed shareholder distribution targets. In the upstream, The agreement with NEO Energy to merge our UK North Sea assets aims to create one of the largest operators in the region, enhancing the scale, efficiency, and growth prospects of the combined entity. In renewables, we complete our fifth asset rotation in Spain, and we have validated our growth strategy in the US, completing our first rotation there. Regarding shareholder distribution, the first buyback program of 2025 was implemented in March with the aim of reducing our share capital equivalent to 350 million euros before the end of July. Subject to the approval by our next AGM to be held in a month, we confirmed the payment of 0.5 euros per share as the second dividend of 2025 And we announced a payment of another 0.5 euros per share for January 2026. Looking at the quarterly results, adjusted income was 651 million euros and 1% increase over the fourth quarter of 2024. Cash flow from operations, excluding working capital movements, amount to 1.6 billion euros. Organic capex was 1.2 billion euros, the lowest level since the first quarter of 2023. Net capex after disposals and rotations stood at 1 billion euros. Out of the 2 billion euros of disposals expected for 2025, we have already announced 0.7 billion, of which 0.4 have been cashed in, with the remaining 0.3 billion to be received later in the year. We have to add to this figure the tax equity component of the project PECOS that is going to increase this figure to 0.8 billion. Net debt close at 5.8 billion euros, an increase of 0.8 billion since December. This rise was driven by a seasonal increase of working capital, the shareholder remuneration that is usually concentrated in the first quarter and the cash out of the Bungie transaction. Looking at the main macroeconomic indicators of the quarter, starting with oil, despite the change in the market dynamics, prices remain consistent with the previous quarter. Brent crude averaged $76 per barrel and 1% increase compared to the fourth quarter in 2024. Gas prices in the U.S. maintain their upward trend held by cold weather and LNG exports. Henry Hub averaged $3.7 per million BTU, a 32% increase over the previous quarter. In Europe, the effect of a colder winter could offset the significant LNG flows coming into the continent. Repsol's refining margin indicator averaged $5.3 per barrel, a 10% increase over the last quarter of 2024, driven by stronger middle distillery differentials, mostly of diesel spreads. The exchange rate averaged $1.05 per euro. However, uncertainty around the commercial policies led to a recovery of European currency towards the end of the period, closing at $1.08. In the upstream division, first quarter adjusted income was 558 million euros, 3% higher year over year, driven by higher gas realization and lower costs, partially compensated by lower production. Production averaged 550,000 barrels equivalent per day, 3% lower quarter over quarter. The higher contribution from Libya on Marcellus was offset by divestments, natural decline, and mainly by maintenance activity in the UK. Currently, we are producing around 560,000 barrels per day after overcoming the maintenance turnaround, intense turnaround we had in our assets in the North Sea in the UK. In Libya, net production averages 38,000 barrels per day after the connection of new wells and allowing us to reach our maximum production level since 2019. In unconventionals, the production hedges in place for 2025 and 2026 ensure activity levels in this volatile scenario. This hedging strategy has been extended into 2027 having already covered 12% of our gas volumes that year, I mean, through a zero-cost collar structure. In the UK, the strategic agreement with NEO UK marks another step in the optimization of our portfolio. Repsol will hold a 45% stake in the combined entity and completion of the transaction is subject to the customary conditions for this transaction. The new jointly controlled entity named NEO Next aims to create one of the largest independent producers in the UK continental shelf with a projected production of 130,000 barrels per day in 2025. Its large and diverse portfolio will enable the new company to continue delivering operational efficiencies while pursuing organic growth, targeting synergies of more than $1 billion enhancing cash flow generations and returns. Repsol will retain a funding commitment up to a nominal amount of $1.8 billion of the commission liabilities related to its legacy assets. This amount does imply a higher exposure of Repsol. Our focus on improving our AppStream portfolio includes the efficient delivery of the key transformation projects currently under development. Before the end of 2025, we expect four startups contributing with lower break-even and lower emission barrels to our production current volumes. In Trinidad and Tobago, the Cypri project reached first gas earlier this month. Peak production is expected in 2026, and it will contribute 19,000 net barrels equivalent per day to Repsol. In the Gulf, Leon Castile remains on track to start production in August, and in Brazil, the Lapa Southwest project advanced towards beginning production in November. In Alaska, the first phase of PICA is scheduled to achieve first oil before year end. In the industrial division, first quarter adjusted income was €131 million, which compares with a result of €731 million in the first quarter of 2024, mainly due to a lower contribution from refining. Refining margins sustained the recovery initiated in the fourth quarter of 2024 within a general context of margin normalization towards mid-cycle levels. Business fundamentals remain supportive as evidenced by the large draw of European product inventories. Looking ahead, the expectations of healthy margins for the rest of 2025 have been overshadowed by the uncertainties on global economic growth and a potential demand destruction due to tariffs. The margin indicator has averaged $4.2 in April, 5.3 of today over the whole year. Yesterday, the margin was $6.8 a barrel, and this morning, $7.5 a barrel. So we are seeing a recovery over the last days. In the first quarter, the utilization of distillation and conversion capacity reached 83% and 91%, respectively. Refinery runs were impacted by planned maintenance in Bilbao, Tarragona, and Porto Llano, with the objective of completing main plan turnarounds before the start of the driving season. The margin premium capture over the indicator was 0.02%. $0.7 per barrel, negatively impacted by intense maintenance activity, and the elevated water content in the Maya crude refined. Remember, we talked about that two months ago in February, which requires a slight reduction of distillation, but mainly we have to dilute the crude to minimize the impact with an economic impact on the operations. A total of four cargoes of Venezuelan crews were processed equivalent to around 4.5 million barrels. In the light of present instability in a scenario of potential outage of specific types of crews, the flexibility of our refining system would allow us to process a wide variety of alternatives that other refineries wouldn't be able to handle. Finally, in the wholesale and gas trading business, the operator of Calcassier Pass LNG, started commercial operations in April, ahead of the date assumed in our budget, and this advance increases the expected number of gas cargos to be lifted by Repsol from this facility in 2025 from 7 to 11, contributing an additional 100 million euros approximately of operating results this year. In the customer division, first quarter performance benefits from the resilience of the commercial businesses, further strengthened by the expansion of Repsol's multi-energy offering. Adjusted income was €160 million, a 3% increase over the first quarter of 2024, mostly due to a higher contribution from mobility and LPG, partially offset by a lower result in the rest of segments. EBITDA reached 328 million euros, a 24% improvement over the same quarter last year, as we were towards the 1.4 billion euros objective for this division in 2027. Mobility sales of road transportation fuels grew by 11% year over year, mostly as a result of the effective anti-fraud regulatory measures and control that they were adopted in Spain towards the end of last year. Repsol has reached more than 1,000 service stations in Spain and Portugal, offering 100% renewable fuels to our clients. On track to reaching 1,500 by the end of the year, and this is aligned with our strategic ambition to become the leading supplier of renewable fuels in Iberia. The number of digital clients, including users of wireless, grew to 9.6 million by the end of the quarter, a 16% increase over the same period of 2024. In power and gas retail, Repsol added 127,000 new customers over the first three months of 2025, reaching a total of 2.6 million customers as of March, of which more than 1.5 million have a multi-energy plant. Finally, in low-carbon generation, first quarter Adjusted income was 5 million euros, which compares to a loss of 6 million euros in the same quarter a year ago. Results were driven by higher power prices and higher renewable production, partially offset by a lower contribution from combined cycles. The average pull price in Spain was 86 euros per megawatt hour. 92% evolved year over year. The total power generated by Repsol reached 2.1 gigawatts hour, including 1.7 in Spain and 0.3 in the USA. In Chile, Repsol started earlier this month its Antofagasta Phase 1 project, our largest wind farm to date, with a total installed capacity of 364 megawatts, and another 450 megawatts are planned in Phase 2 of the project. Our objective to optimize the capital structure of the business continued through an active asset rotation model adapted to the geography of our portfolio. In Spain, being able to deliver a clear double-digit equity IRR with different partners at different times and with different technologies demonstrates the attractiveness of the position we have built. In March, we completed the rotation of 400 megawatts wind and solar portfolio, value of 580 million euros, and we are in the process of executing another rotation of 700 megawatts expected to be completed before year end. In the U.S., we reached an important milestone in our strategy, completing our first asset rotation in the country, not in the best moment, you know, and confirming the appeal of our U.S. portfolio for leading investors. Under the agreement, we'll divest a 46% stake in a 777 megawatt portfolio with a total value of $795 million, including $60 million in tax equity proceeds. And the portfolio includes the Fry Solar project and the Hikariya Solar and the storage complex. The partners will maintain joint control of the assets And in addition, for the remainder of 2025, we expect to execute the rotation of outposts with a total of 629 megawatts of installed capacity. In the case of outposts, the fundamentals in terms of BPA are better, are higher, because the moment we took the FID of the project, and also because the development of the project time the capex are also better for us. So we have a clear and a good expectation related to the divestment of rotation process, but a set of outposts after the process we executed related to Frye and Jicarilla's projects. Moving now to the financial results in this slide, you may find a summary of the figures we have discussed today. For further details on our results, I encourage you to refer to the complete set of documents released this morning. I'm looking now to our updated outlook for 2025 based on today's visibility. I mean, let me say I'm going because I know that what I'm going to say now could be confused. I'm going to try to be crystal clear about that. The guidance for the year remains unchanged under our original macro assumptions, including shareholder remuneration objectives. We don't anticipate new major project sanctions between now and the end of the year, except for the approval in coming 12 months of the three electrolyzers discussed in our previous conference call. As a reminder, the Spanish government awarded last week 315 million euros to electrolysis projects at Bilbao and Cartagena, with cash in expected in 2025. On top of that, we have the Innovation Fund for Tarragona. And with these three electrolysis, we are going to fulfill, adding, of course, the biomethane that we are going to use in our refineries to produce also green hydrogen. We are going to fulfill the regulation mandates we have for ourselves by 2030 considering a stress scenario and again the guidance for the year remains unchanged but it's our duty to consider in this volatile scenario worldwide the possibility of seeing a stress scenario and we take a stress scenario of 65 dollars brent from April 1st on to the rest of the year, $3.5 heavy hub, and a $4 refining margin indicator from April to December. The cash flow from operations for the year will be projected at 5.5 to 6 billion euros. In this number, the negative impact of the lower commodity prices would be partially compensated by a higher ambition in the efficiency and competitiveness improvement program that we launched in October for this year. I was not, let me say, fully transparent about that in February because I prefer to talk about delivery than talking about announcement of efficiency and competitiveness programs. We put this program in operation in October And this year, we are going to have a contribution from this program, and on top of that, from the integration of the UK business. Additionally, for that reason, of course, we are going to project, in this stress-acid scenario, a cash flow from operations from 5.5 to 6 billion euros. Additionally, we estimate a capex flexibility that we are already acting on, seeing the volatile scenario where we are, of around €0.5 billion in our budget, which will situate the 2025 net capex figure at around €3 to €3.5 billion this year, considering €2 billion from divestment and asset rotation. Let me say that 40% of this divestment and asset rotation have been executed by april 30th so under this scenario we will be able to maintain the control of net debt and respect our distribution commitments in any case so in conclusion repsol keeps delivering on its main strategic objectives according to the priorities defined for 2025 In the upstream, portfolio high grading continue with the agreement to merge our UK business, becoming one of the leading operators in the region. In renewables, our value proposition has been reinforced by a new asset rotation in Spain and our first transaction of this kind in the US. And to finalize, I'd like to underline that even in an unstressed scenario, again, we maintain the guidance for the year as we did in February, but assuming that we could enter, because it's not in our hands, what could happen in terms of GDP growth in the world, taking into account the current volatility. So let me underline that even in a stress scenario, and the stress was defined by the margins and the commodity prices I said before, the guidance for the year in terms of shareholder distributions and net debt will remain unchanged. supported by the resilience of our integrated businesses, the flexibility of our CAPEX budget, and the contribution of our efficiency and competitiveness program. 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 very much, Jesu John. And now, as usual, before moving on to the Q&A, I would like the operator to remind us of the process to ask a question. Please go ahead, operator.