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.

Thank you. To ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To answer your question, please press star 1 and 1 again.

Thank you, operator. Let me now move to the Q&A session. Our first question comes from Alessandro Pozzi at Mediobanca.

Good morning, and thank you for taking my questions. I have three, if I may. First of all, thank you for providing more color on the new stress scenario. And with that regard, I was wondering, you mentioned about half a billion of capex flexibility. What are the projects where you can potentially rein in capex if you see a lower or weaker macro environment? The second question is the power cut that we've seen this week in Spain. I believe the impact on the operations is minimal from what we understand. But I was wondering if there is any impact on potentially the sentiment for renewables. And bear in mind, we don't know the cause yet, but I was wondering whether I don't know, there could be a change in the sentiment that could lead to maybe a different type of attitude towards the sector. The final question is, you mentioned about Venezuela. What do you think is going to be the availability of heavy grades in 2025? How can that potentially help your crack spreads also in light of potential increase from OPEC production? Thank you.

Grazie mille, Alessandro. So going to your question about the CAPEX, I mean, I mentioned 500 million euros and 200 are going to come mainly from, in this, let me say, volatile scenario, it makes sense, delaying some FIDs of renewable projects. So we are not going to take new FIDs in this scenario now, I mean. On top of that, we will be talking about 200 million euros in this business. We have, as I mentioned before, a natural lagging process in the decision-taking process in the industrial area and in the transformation of industrial area. We are talking, probably speaking, about 150 million or something like that over the whole year. We have a delay and a stop in this context to small transactions in organic. I mean, we are talking about 50 million euros, more or less, in the commercial businesses. That didn't make sense, again, in this volatile scenario. And, I mean, we are not acting. My message to the E&P leader of the business is to accelerate as much as possible Leon Castell to be producing by August, to try to accelerate it. or to maintain, let me say, the scheduled time for PICA to be produced in December. And on top of that, it's true that we have reduced some small capex, non-relevant, and mainly in some cases associated to programs we have in countries like Colombia, debt, because we invested, divested before preparing the budget of the year. We have some room to reduce this capex we were forecasting for this country. something close to 50, 80 millions in the case of the EMP business, some corporate small businesses or small investments. So all in all, 500 million euros, again, main of that coming from the renewable business plus the lag in the decision-taking process of some investment in the industrial area. So in any case, we are putting on track, better said, we put on track one month ago this approach in terms of CAPEX, seeing that... the global numbers in terms of growth and so on, they were deteriorating. And for that reason, I mean, again, I'm quite comfortable saying that we are going to be in a net capex this year, something in between 3 to 3.5 billion euros. Going to the impact, you know, everybody knows what's happening, the consequences of what happened, better said, in Spain on Monday. the impact of our industrial assets was immediate. We had a shutdown process of five refineries in Spain in the first, let me say, seconds of the process. I mean, our four refineries, they went to zero. And the first refinery that started, let me say, having power to restart processes was the refinery in Bilbao because of the closeness to the French border. That seems to me that happened roughly speaking six hours later at 6.30 p.m. And over the whole evening, all the refineries have the access to power. Our concern in these kinds of processes is always the risk we could have of some incidents Caucasian processes, solidification of streams in the pipelines and so on that could make very difficult to overcome and to restart operation. Fortunately, nothing in this, I mean, let me say, I think that this was a combination of a good operation, good teams, but I mean, I'm not going to hide that we were quite lucky regarding the consequences of this shutdown process. So that means that there is no any kind of negative impact. We are going and we on Monday, we start the process of evaluation to try to retake production. Probably speaking, the distillation is coming. Let me say schemes they could have three days. Three days will be needed from the beginning of the restructuring process to start operated. In the case of conversion units, I mean, it depends on the kind of conversion, but I think that this is probably a more correct talking to approach something between five, seven days. As average, some of them could be before, perhaps the hydrocrackers in the higher range, seven days. That is going to be, let me say, the consequence. In supply terms, any concerns? We had concerns, of course, on Monday. But we were able to react even, I mean, with an open dialogue with the Spanish strategic reserves corporation that yesterday decided to reduce in four days the strategic reserves of the country in terms of products to guarantee the supply. So the market is reacting in the right way. Sales were growing in a normal way. on Tuesday, recovering the volumes we had before the blackout of Monday. So that is fortunately for our operations. Let me say now we have to work, but that is over and the impact is going to be reduced to those days I mentioned before. I don't want to enter to speculate about what could be the root cause of what happened on Monday. Of course, you know that there are public investigation processes, and we prefer to wait and to expect the conclusions of these investigations on track. Let me say that in any case, in any regulatory framework, the current one or a future one, I think that renewable energy generation is going to go on being a relevant part of the spanish production system but again i think that the investigations are on track and i don't want to enter let me say to to to add more noise to what we have in the country in terms of speculation about what happened with the blackout of friday uh going to to venezuela i mean first of all let me say that as probably everybody of you know, we received at the end of March a communication from OFAC giving us the same treatment of all the American companies, explaining that specific license will be revoked on May 27th, 2025. The American companies operating in Venezuela, they've received something very similar or exactly the same. I have to remind you that our main activity and production is not under this license. It's not oil production. We are mainly gas producers in Venezuela, and 85% of our production in Venezuela is gas production. And let me say that we have a direct and open dialogue with US authorities, and we work jointly with US authorities with the objective of holding our assets and our activity in Venezuela in the future. So we are speaking, we have an open dialogue, and in this sense, I prefer to go on working on that in this frank and direct relationship we have with the American government. The impact from OPEC production, I mean, fortunately, you know, that in the Atlantic Basin, I think that we have a lot of sources of heavy oil. We have Colombia, we have, at the moment, we have Venezuela, we have Canada, we have Brazil, we have a Western African production. On top of that, you know, we have a supply from Italy, from Albania, from South Iraq, and so on. And it seems to me that more OPEC production could mean more heavy oil in the market because this production could add in some way some kind of heavy oil supply to the market. But again, we are always, let me say, occupied with that, but we don't have any special concern related to the supply of heavy oil to our refineries. Thank you, Alexander.

Thank you.

Thank you very much, Alessandro. Our next question comes from Alistair Syme at Citigroup. Go ahead. Thank you.

Thanks, Pablo. One very quick question. First, just the currency assumption that you're using in your stress scenario, is it the same as you were previously using? And secondly, in a slightly bigger perspective, but as refining margins come down, we're getting some sense of the underlying performance of the refining business again. I was just looking, if you sort of look at run rate EBITDA in refining, you're about 25% below where you were in 2015 through 2019, which seems like a reasonable period to compare to. Is that difference just energy costs, or is there something else we should be thinking about as we sort of model the profitability of refining in this environment? Thank you.

Okay, thank you, Alistair. First, in this stress scenario, the assumption, euro-dollar, we are taking is 1.10. I mean, if you consider the 1.10 from, again, April 1st to the end of December. If we take, for instance, 1.12, you have to reduce the cash flow from operations in 30 million euros Per every cent, you increase the weakness of dollar. So that means that 1.12 will have a 60 million less in terms of cash flow from operation, roughly speaking. But again, our CapEx commitment in euros, because we are mainly working as Repsol in euros, with a weaker dollar, taking into account that our main CapEx effort is either in the EMP business or in the renewable business now is focused on the United States, we also have less net capex due to this weaker dollar. So, I mean, that are the figures. For transparency, we have the budget for this year at 1.10 because, let me say, that was the indication of our chief economist for 2020. I know that it was not evident in December, not even for me. I have to realize that he was right again. So going to refining EBITDA margin, let me say, I mean, the EBITDA break-even today, I'm going to check this figure, today could be, in general terms, in recurrent terms, is lower than the EBITDA break-even we had in a refining system in 2019. This first quarter, we have some additional effects. And these additional effects are, first, the turnaround due to the maintenance in Porto Llano and Petronor, that reducing distillation is also impacting the EBITDA. On top of that, the EBITDA break-even is also depending on the premium. and as i mentioned before we have had two negative impacts on the premium and the most important of that has been the the the maya crude oil problem with with water that i mentioned remember in in february that the impact on january was 17 million 17 million dollars in january so we have something similar in the in february and a figure slightly below but not not very different in March. So behind this 45, roughly speaking, of $50 million is the $0.5 barrel of reduction of premium. Thank you, Alistair.

Thank you very much for your question. Our next question comes from Michele de la Viña at Goldman Sachs.

Thank you very much. Two questions, if I may. The first one is on the potential impact of the US tariffs and if that in any way could impact some of your developments in the US at the moment. And then secondly, I was wondering if you could perhaps lay out some of the accounting impacts of the UK joint venture if we started to see some of that already in Q1 and what's going to be the impact on the rest of the year. Thank you.

So, first, I mean, we have seen what is happening in the U.S. from many angles and points of view. I mean, it's true that the current message of the U.S. government emphasizing the importance of secure, affordable, and responsible energy is fully aligned with the principles that we have defined in Rapsol and in our own strategies. But it's also true that we are experiencing now a volatile scenario with these, let me say, messages around tariffs and so on that are creating some source of a lack of certitude, globally speaking. And I mean, Taking into account what you are saying, let me say that in projects with FID, because the degree of development and commitment of this project, this potential, because again, we are talking about the potential scenario about tariffs, is not relevant. If we go to new projects, it could be relevant. We don't know. And for that reason, I mean, we prefer to wait and not taking, let me say, new investment or FID commitments before knowing what is going to happen exactly. I'm not saying that that is going to be bad at all. What I'm saying is that, of course, we prefer to have all the cards in our hands behind playing the game. So we are going to wait. We are going to see how these negotiations worldwide and specifically between Europe and US develop over the coming weeks, months. And we hope and we expect that that could be fine. But in any case, we prefer to have, of course, all the figures on the table before the taking any kind of investment because, of course, we have to take, imagine, a project and you have to close not only the FIDs and commitments in terms of capex, you also have to take the commercial side from the other side and you have to try to link both parts in terms of return. So it makes sense. to wait a bit before having this kind of commitments. Going to your question about the UK, the closing is going to happen at the end of the third quarter of this year, 2025. At closing, we don't see any relevant impact on financial statements. And let me say in accounting terms, we have to see what is the impact in terms of the play, let me use the term, between the current commitments that today are the commissioning commitments that are of course in our balance and which part of that is going to convert in financial debt. But I mean, in terms of the balance is going to stay in the same terms, but we are going to have probably and accounting change in the third quarter after the closing. But again, with no relevant impact on financial statements. Thank you, Michele.

Thank you very much, Michele. Our next question comes from Alejandro at Santander. Go ahead, Alejandro.

Hello, good morning. Thank you for taking my question, I'm John Pablo. One question is about the guidance on the stress scenario. I remember in the fourth quarter results, you also announced a minimum share buyback of 700 million euros if you maintain also this guidance, even in a stress scenario. That's the first question. And the second question is also in connection with Michele's question about the US and investments there. If you can give us any color about the U.S. natural gas business, if you are planning to reactivate some rigs or additional activities that are in this scenario of resilient U.S. natural gas prices. Thank you.

Thank you, Alejandro. So, crystal clear. I mentioned, we have our guidance. That is the same guidance we had in February. under the hypothesis that is our duty to do that of this stress scenario as i defined before we will maintain our distribution program that means that we are going to maintain i mentioned that we expect something between 5.5 to 6 billion euros of cash flow from operations in this stress scenario so we will maintain 30 35 cash distribution amount for related to this cash proper operations and being very specific i mean under this scenario i defined before we are going to maintain this minimum of 700 million euros equivalent for our share buyback program this year crystal clear thank you alejandro sorry The U.S. natural gas business, we have a positive approach. We have already one rig working in the Marcellus, so increasing, let me say, our bet in the area. And in this sense, of course, we are in a prudent way. As I said in February, remember that I mentioned that, I mean, we want to have approach about prices because our main target in the unconventional has to be to guarantee and to increase free cash flow in this kind of assets because the unconventional in the past you know that companies we were very focused on net present value and this kind of concepts that are of course are true are okay but free cash flow is very important. So, price in terms of CAPEX is important. In this sense, the free cash flow this first quarter of Marcellus was 150 million euros positive, even though this CAPEX effort we are developing, and I mentioned before. Thank you, Alejandra.

Thank you. Thank you very much, Alejandro. Our next question comes from Viraj Borkataria at RBC. Go ahead with your question, please, Viraj.

Hi, thank you both. Just wanted to go back to the stress scenario you put forward, because I think a number of investors may consider that a base case scenario. So I was just wondering how to think about how much cap expects you have if you're in a more stress scenario, let's say, because we don't know what's going to happen with OPEC and how tariffs play out. So That 500 million flex you talked about this year, is that the maximum? And how should we think about how much flexibility you have for 2026? And then a couple of quick modeling questions. There's been a big delta between cash tax and P&L, not only for Q1, but, you know, last year or so. So how should we think about this year and anything you can say on working capital expectations for the year? Thank you.

Thank you, Vega. So let me say that you always have flexibility related to capex. From my point of view, the question is the kind of pain you are going to provoke with this capex reduction. For instance, I could say today, I mean, we want to delay the capex, let me say, in Alaska, but we don't want to do that because we are seeing a first order in December. We could take the decision of, okay, we are not going to take the FID of an electrolyzer, but the kind of thing we will provoke will be that in 2030, we have to fulfill our regulation as European operators in terms of adding a minimum of 1% of renewable fuels with non-biological origin to our products. And the only way we know to do that in theoretical terms is through and we have the opportunity to reduce in a dramatic way the net capex of these projects thanks to strong public support for this FID. So I think that today reducing 500 million euros in the capex we mentioned before is the kind of reduction we could do not provoking any kind of additional pain in the organization. So that means that we are going to be something in between 3 to 3.5 billion euros of net capex this year, and we are going to use the common sense to take decisions related to capex. In case of seeing, let me say, that the world is entering not in a stress scenario that i defined before that i think that is quite stressed taking into account the variables and the commodities we have today we could act and we could do additional things and we could stop projects as we did in 2015 2016. we know how to do that and in some way let me say that repsol because the kind of assets we have and so on because integration level, we are a company that usually performs better than others in a stress time. I'm not going to say that we perform better than others in good times, but perhaps in a stress times you could take from the history of the company. So in this sense, let me say that what we have seen also is that 2026, that is going to come healthier in terms of capex. Again, not touching this pain I mentioned before. Why? Because, as I mentioned, two of the three projects in terms of investing in the E&P are going to have an end this year. Leon Castile and the main part of PICA. PICA is going to have some tails in 2026. And that is going to reduce the capex effort in the afternoon. So we are going to have for that reason an additional flexibility in 2026. And again, I think that we are comfortable maintaining the guidance we have in terms of 5.5 to 6 billion euros in terms of cash flow for operations this year in case of under stress scenario. Maintaining the debt level, roughly speaking, we have at the beginning of 2025 and at the same time fulfilling our whole commitment in terms of distribution, I think that is quite fair. Going to your question about tax versus P&L difference, I mean, what we have seen is an effective tax rate at around 39%, 40% this year for the whole year 2025. And we expect a cash out over the whole year that could be at around 1 billion euros for the whole year. And I think that what we have seen and mainly this quarter is overpayments in previous years. So that means that we are in some way cashing in what we anticipated by different ways last year. And going to the working capital, we have seasonal reasons. Remember the conversation we had one year ago in April? I said that we will have, let me say, a flat for the same prices, flat working capital for the whole year. And we were there at the end of 2025. So that means that this year, at the same price, we are going to have a working capital that is going to be the same or similar to the working capital we had at the beginning of the of 2025 of the end of 2024 a better better set and we have a major link to the refining maintenance i mentioned before in petronor and in in portugiano behind this working capital increase thank you

Thank you very much, Viras. Our next question comes from Pablo Cuadrado at Kepler Chevro. Go ahead with your questions, please. Thank you.

Hi. Good morning, everyone. Three quick questions, please, on my side. The first one is on the DNA, on upstream. I noticed that it was significantly down in Q1 versus Q4. I think last year the trend was also similar. It was quite low in Q1 and later it was going up. So can you help us to understand, you know, a little bit the difference and maybe to help to understand, you know, guidance for full year in terms of the DNA? Second question is on the, there is a significant decline on the non-current provisions during Q1 at the balance sheet, around 2 billion reduction. So if you can provide also more detail on this. And third is related to the completion of the acquisition or bond reburial during Q1. So we expect that now that this deal has closed that you should probably get a benefit in terms of a cheaper cost on the feedstock to produce wing of wells and therefore to see a bit of an improvement on the operation of those activities that I think right now in the overall market the situation is quite difficult.

Thank you.

So, gracias, Pablo. Going to your first question, it seems to me that there are two main reasons. Probably the most important is less production in the first quarter. As I mentioned before, we took the decision of shooting down all our facilities in the North Sea in order to proceed to a deep and strong maintenance campaign In the area, we lost production in the quarter. We have recovered this production. Today, we are producing about 560,000 barrels a day thanks to this increase of production. We have to take into account that in the UK, after the closing of the third quarter, we are going to increase this figure something in between 20,000-25,000 barrels a day because the new NeoNext company we launched some weeks ago. And that is the main factor explaining this depreciation reduction in the first quarter. We have also to add two things. One of them for the first question related to the depreciation is also the impairment. In some, because prices, commodity prices and so on, we did in the fourth quarter, as you know, and we announced in February. So that means that less capital employed in our balance related to this impairment means less depreciation. Going to your second question, I mean, I encourage you to check what I'm going to say now. with IR, but my perception is that the main factor probably is the reclassification of the UK as assets for sale. And there you have the UK liabilities. And that is related to this, let me say, reclassification because we are merging and we are going to have a control in the case of the of the of the uk and we are going to have a close in the third quarter so uh what we are going to to have is is the consideration of uk as an asset for sale so it's mainly the uk liabilities but again you could check the exact amount of this figure with the i team bungee iberia what we expect from this transaction. So what we expect from this transaction is, first of all, I mean, we have a 40% of a business, a business with a positive EBITDA, and we are going to have, let me say, the benefits of being part of this business. On top of that, we are going to have also an expectation of a better feedstock and a cheaper feedstock. We are considering a reduction in terms of feedstock from this improvement that is going to be at around $50 a ton as a reduction. And what is more important, We are going to have also the access to new crops, new feedstocks. We are going to innovate with them. I mean, camellia and some other sources of feedstock that are going to add more competitiveness to our renewable fuel production. Thank you, Pablo.

Thank you, Luciano.

Thank you very much, Pablo. Let's go with our next question. It comes from Irene Jimona at Brestain.

Thank you very much. Good morning, José John. The stress test is very useful. Thank you. I wanted to ask what cost savings, so what OPEX reductions will your October efficiency program contribute to the cash flow in that stress scenario, please? And then secondly, on the U.S. renewables rotation. You had indicated back in the fourth quarter conf call a second U.S. rotation later this year. Can you say if you are experiencing a, let's say, deterioration in the U.S. environment for this type of deal, given the U.S. president's obvious dislike of the renewables industry? Thank you.

thank you irene when we are talking about the efficiency and competitiveness program the figure roughly speaking is at around 450 million euros of opex production this year the main part of this figure going to the emp 450 sorry The main part comes from OPEX. There is a part, I mean, 25%, rather speaking, that will come from the working capital. Optimization in structural terms. I mean, because we changed the operational model and the way to operate our industrial assets. So, these 450 million euros, if we go to the E&P, the main sources are the saving costs and efficiency in the UK operation. That is very important part. We have the GNA, because we are changing the operation model in the U.S. in the unconventional with a strong impact in terms of GNA. It's also a project that is part of this change. Let me say that on top of that are the quick wins and the more important figures. All that is in some way embedding the whole E&P business. If we go to the industrial business, I mean, I could deploy measures that could go to the acceleration of some reduction of CO2 programs, so that means less energy. In the case of refining, we have the change of the maintenance model, improving and optimizing what we call the one store, one lab program. That means that our five refineries are integrating all the storage they need for maintaining, optimizing the working capital and optimizing also the operational cost. We are applying, changing the maintenance model of tanks, entering the robotics to change that. I mean, we have, let me say, programs, In the chemical business, for instance, as I mentioned before, we are going to reduce in 25, 30 euros a ton, the break-even of the chemical business this year, and that is also part of this program. In the case of the commercial side, we have an increased multi-energy approach with an improvement of the fundamentals of the business that is going to have as a consequence that we are going to have an EBITDA in this business higher than what we expect in our budget that is going to be at around 1.25 billion euros this year, roughly speaking. Also, we are optimizing the renewable business, the corporate side. So we have, let me say, last summer, September, October, seeing what was happening, let me say, in the world before this quarter, we launched this deep program that is embedding in some way the whole company. Let me say, going to the U.S. renewable, first, I mean, I don't know what could mean. I share your point, but I don't know what could be a deterioration of the environment in the U.S. That could happen. But saying that we have closed the Stone Peak transaction, let me say, not exactly in a good moment in volatility terms. In April 2025, let me say, in the midst of the storm in some way, and we have been able to do that. And not only my hope, my expectation is, and probably I don't, said that in a public way, as I'm telling you today, but probably in the one-to-one meetings with all the analysts and investors, I have shown that because the conditions were, we took the FID of this Friar Jicarillas project, that was the FID after the pandemic, that means with lower PPAs than what we saw later, We took the Ukrainian crisis and the solar panel supply chain concern when we invested in this project. So what we have behind Outpost, Pennington, Pecan Prairie are significantly better in terms of PPA in the long term. That means that we have better projects for the future. On top of that, the CAPEX has been optimized in many of these projects because I mean, they didn't suffer what we saw two or three years ago. And for that reason, I mean, I can't say, Irene, that things couldn't be worse in the war because it's not in my hands, but I have a better expectation for the fourth quarter, second U.S. rotation because we did this one that was for these conditions I expressed before, more difficult. Thank you, Irene.

Thank you very much.

Thank you very much, Irene. The next question comes from Henry Patricot at UBS.

Yes, good morning, everyone. Thank you for the update. Two questions, please, from my side. The first one on production for the year. You haven't changed the guidance, but if I heard you correctly, John, you mentioned production currently at 560,000 about today and you have quite a few startups over the rest of this year. So just wondering if we should expect the production to be very much towards the upper end of that range for the whole of the year. And then secondly, staying on the upstream side and following up on the comments on hedging, can you just remind us where you stand for 2025-2026 as well on U.S. gas price hedging, the percentage and the levels that has changed? Thank you.

Merci, Henri. If we go to the production, I mean, we maintain the guidance of 530,000, 550,000 barrels a day for the whole year, but clearly in the high part of the range, it could exceed, yes. But I prefer to be present in this guidance. I maintain the guidance and I say, we will be in the higher part of the range and we will try, let me say, to be more granular in the conference of July. Because it's true that there are four startups but I mean, in the end of July, 1st of August is going to start, Leon Castile is going to add in year terms 20,000 barrels a day, but it's going to start with a ramp up process in July. Probably Leon Castile could add 7,000, 8,000 barrels a day this year, in terms of the whole year, I mean, because it's going to start in the second half of the year. PICA is going to have the first toilet at the end of the year, but it's not going to add real barrels this year. LAPA is going to happen in November, but we could be talking net reps of 1.5 thousand barrels a day, roughly speaking. So, I mean, that is going to happen, high part of the range. Probably the most important game changer is going to be the 20,000, 25,000 new barrels that are going to add from September 1st, UK. But I'm more comfortable saying that we will be in the higher part of the range. Hedging. I mean, I have the note in front of me, so I'm going to try to be very clear. 2025, we have 55,000 of the volumes hedged. A put call caller with no cost, 36.1. By 2026, we have almost 60% of the total production hedged. with an output collar structure that could be in 75% of the hedges, 3.2, 5.1, this collar, and 25% of this hedging next year with 3.5, $12 million BTU, I mean, in the collar. That means that we take from 3.5 And we have all the upside till this figure that is exactly 11.7 to be clear. And by 2027, we have 12, 15% of the production hedge with a collar, with a put three and a call of $5.75 million BTU. So is there any change? Is there, let me say, a small addition of volumes in this range? Thank you. Merci, Henri.

Thank you.

Thank you very much, Henry. Our next question comes from Shashikan Chilikuro at Morgan Stanley.

Hi, thanks for taking my questions. I had two, please. The first one was relating the disposal proceeds. You've maintained the $2 billion disposal and rotation proceeds. I was just wondering if you can provide a breakup of that guidance. You've highlighted 40% already been is already achieved through the deals that have been announced so far. Do those relate to these rotations, the two rotations that you have highlighted? Is there anything there? Anything more there? And also, I remember you had like 40% of the $2 billion related to upstream sales. I was just wondering how confident you were in achieving those as well. Thanks. The second one, was back to the refining result this quarter. It's just a confirmation you highlighted two reasons, the crew quality effect and the turnaround effect. Is it possible to quantify what was the impact because of those two? And just wondering if you were to look forward, these two have been addressed and there's not much data on activity in the coming quarters. I just wanted to check if these could potentially be reversed as well in 2025. Thanks.

Thank you, Shashi. I mean, 2 billion, as you mentioned, 40%, including the tax equity part, close, 60% pending. We are in April. It's related to the two rotations I announced, that means the Spanish 700 megawatts assets plus the outpost project in the US. And on top of that, I'm not going to hide that we are also, of course, analyzing the market, the potentiality of assets where we don't see today a potential value creation and the strategy of the asset rotation and portfolio management we could explore. And when I say that, I could mention either the low-carbon business or some others. But again, we are always touching the market and we have the target of disposing 2 billion euros this year. I mean, having achieved 40% of figures in April, I mean, it's not guaranteed that that is going to happen, but it's giving us a clue that we are taking this subject in a very serious way. Refining margin, roughly speaking, I mean, Maya, $0.5 a barrel. If we take the balance of the turnaround program over the whole year and the concentration in the first quarter, 0.35, so close to 0.4, the barrels today, the turnaround program plan. And we had some operating issues in Tarragon that, probably speaking, could be $0.2 a barrel. All in all, $1.1 a barrel that we are in some way missing this quarter because I said before. Thank you, Sassi.

Thank you very much, Zazir. Our next question comes from Paul Redman at BNP Paribas.

Hi, guys, and thank you very much for your time. The first one's just on the capex and timing of divestment cash flow. Just to be clear, is your expectation you would have the cash in from the divestments before the end of the year, so the total $2 billion, or is it based on announcements? And if there was a delay to divestments, i.e. no announcement before the end of the year on the rotations, How should we think about capex? We've spoken about flexibility, but is 3 to 3.5 a ceiling? And then secondly, just to be really clear on the minimum 700 million euro buyback, is that at prices below the scenario or should we remain thinking about 30 to 35% being the base case?

Thank you, Paul. So we have the commitment to cash in 2 billion euros this year. Of course, we have different cards on the table. That means that we will have in some ways delays and in some others anticipation. So we are going to play with more cards than the cards we need to have these 2 billion euros of disposals and rotations with a clear target of cashing 2 billion euros this year. Going to what you said, I defined an ACID scenario. And in this ACID scenario, what I'm saying is that we remain thinking about the 30, 35 of the cash flow for operations we have in the base case. And I was crystal clear saying that, I mean, if this 30 is 1.65 billion, are you going to... to develop the whole 700 million euros you committed? And my answer is yes. We are going to guarantee this minimum of 700 million euros under the ACID scenario I defined before. I'm not going to go to the maths to reduce these 700 million euros. Crystal clear. Saying that, I mean, if there were drugs and we are in a different scenario that is not Paul, we will meet in July in the conference for the second quarter, and we will define our strategy in a world that is dropping. Thank you.

Thank you very much, Paul. That was our last question today. With this, we will bring our first quarter conference call to an end. Thank you very much for your attendance.