Repsol Sa Sp/Adr

Good morning to all. Welcome to REPSOL's third 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. At the end of the presentation, we will be available for a Q&A session. 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. Repsol delivered a solid operational and financial performance in the third quarter of 2025, moving ahead on key projects, optimizing the asset portfolio and reinforcing its commitment to shareholder value and capital discipline. The energy landscape continues to be shaped by geopolitical instability and concerns of oil oversupply. In the US, gas prices softened compared to the previous quarter, yet fundamentals still point to a tighter market heading into next year. The refining business continues to build on a positive momentum in a market characterized by a diesel supply deficit. Operations at our industrial sites restore activity levels, following the disruptions caused by the Iberian outage in the second quarter. On the commercial side, all business segments deliver stronger year-over-year contributions. Retail fuel sales remain robust, well-supported by seasonal trends. The adjusted income totaled 820 million euros, 17% above the second quarter and 47% higher than in the same period of 2024. All four divisions improved their results over the third quarter last year. Cash flow from operations amounted to 1.5 billion euros. The accumulated operating cash flow to September reached 4.3 billion euros, 15% higher than in the first nine months of 2024. Net capex was €0.3 billion in the quarter, with a €0.8 billion contribution from disposals, asset rotations, and the €0.2 billion received from the sale of tax credits in the outpost project. The accumulated net capex to September was €2.5 billion, including €1.3 billion in proceeds from disposals and rotations. By quarter end, all the transactions announced in 2025 have been fully collected. Net debt stood at 6.9 billion euros by quarter end, an increase of 1.2 billion compared to June, mainly due to integration of the new venture established with New Energy in the UK. As part of the agreement, Repsol has retained a funding commitment of the commissioning liabilities related to a portion of its legacy assets. This amount was previously recognized as a non-financial liability in our financial statements, so it doesn't increase at all Repsol exposure, but it is now classified in a different way. It's classified as financial debt at the consolidated level. So it's only, let me say, an accounting procedure, and excluding the impact of UK integration, net debt wouldn't be flat compared to June. Gidding rose to 20.5% by quarter end and 10.4% excluding business, remaining aligned with our strategic objective of preserving our current credit rating. Looking at the evolution of the main macroeconomic indicators in the quarter, Brent crude averaged $69 per barrel, 2% higher than in the second quarter, and 14% lower than in the same quarter last year. The Henry Hub averaged $3.1 per million BTU, 9% lower quarter over quarter, and 41% above the same period in 2024. Driven by a strong middle distillate differentials, the refining margin indicator stood at $8.8 per barrel, 49% higher than in the second quarter, and 120% higher than the same period in 2024. Finally, the dollar continued to weaken against the euro with an average exchange rate of 1.17. Turning now to the upstream performance, this division continued to deliver efficient and competitive growth, enhancing returns through new projects and portfolio management. We are improving the business and together with our partner, positioning the company for a potential liquidity event. Third quarter adjusted income was 317 million euros, 28% below the second quarter and 11% higher year over year. Production averaged 551,000 barrels of oil equivalent per day, about 1% lower than in the previous quarter and broadly in line with a year ago. Compared to the third quarter of last year, the impact of divestment and natural decline was offset by higher contributions from Libya and the U.K. In the UK, the merger with Neo Energy was completed in July. The new venture is projected to produce around 130,000 barrels per day in 2025, increasing Repsol's net production in the country from around 30,000 to 59,000 barrels per day. On an annual basis, the JV is expected to contribute around $700 million of EBITDA to Repsol in 2026. In Indonesia, in September, we agreed the disposal of our stake in Sacakeman, completing our country exit after the disposal of our interesting corridor announced in the second quarter. After this transaction, Repsol EMP is now present in 11 countries, 10 producing plus an exploratory position in Mexico, consistent with our strategic objective of concentrating operations on geographies where we hold the strongest competitive advantages. In this regard, the U.S. continues to strengthen its position as a strategic growth region within our upstream portfolio. In the Gulf of America, the joint development of Leon and Castile fields reached first oil in September. And in Alaska, the first phase of PICA is expected to start up early 2026. These projects, together with the upcoming startup of Lapa Southwest in Brazil, are expected to add around 50,000 barrels of oil equivalent per day of new low emissions, low break-even production by 2027. In addition, these developments have accounted for a substantial share of the upstream investment effort outlined to 2027. And the completion will allow us to transition to more normalized capex levels in the division at around or even below 2 billion euros per year. Finally, as part of the preparation of our vehicle ahead of a potential liquidity event, Repsol EMP completed last quarter a $2.5 billion bond offering, the largest in U.S. dollars in Repsol's history. The offering, structured in three tranches, attracted a strong demand, underscoring the solid support for our upstream strategy. Continuing with the industrial division, third quarter performance was driven by the consolidation of the refining up cycle and the solid contribution from the trading businesses. Following the impact of the Spanish outage on second quarter, operations activity at our industrial complexes returned to normalized levels, enabling us to capture the positive refining scenario. The adjusted income totaled 315 million euros, 18% higher than in the second quarter, and 70% evolved the same period a year ago. In refining, our margin indicator climbed to levels not seen since the first quarter of 2024, supported by stronger product spreads, mainly in diesel. The premium over the indicator was $0.7, negatively impacted by the turnaround of Cartagena, and planned maintenance at the C43 biofuels unit, and the absence of crude shipments from Venezuela. The C43 plant resumed fuel capacity operations in October. Distillation capacity utilization was 85%, while conversion units operated at 101% of main plate capacity. Refining margins have remained robust in the fourth quarter, with the indicator averaging $9.8 in October and $7.1 year-to-date. The spot margin this morning was $13 per barrel. No major refinery turnarounds are planned this quarter, supporting healthy utilization rates. Renewable fuels margins remain also at solid levels, driven by stricter regulatory mandates in Europe and lower imports. In the chemical business, market conditions in Europe remain challenging, with flat demand and higher costs compared to other geographies. Repsol's petrochemical margin indicator declined by 22% over the previous quarter, driven by lower prices and higher energy costs. Our priority for this business remains lowering break-evens and expanding margins through differentiation. The CNES expansion scheduled to start in 2026 is expected to add around 80 million euros of EBITDA at the current AC scenario, and the important January new plan dedicated to highly specialized application is also planned to come on stream next year. In the wholesale gas trade, we received five cargos from CalCasioPas last quarter. This is in line with our goal of reaching a total of 11 cargos lifted in 2025, contributing around 100 million euros of incremental EBIT compared to initial plan. In our industrial transformation initiatives, the project to retrofit a former gas soil hydro-thriller in Porto Llano is expected to begin operations in the second quarter of 2026. An additional retrofitting project is currently under evaluation, which will become our third major advanced fuels facility in Spain. In Tarragona, the development of the Ecoplanta is progressing according to plan. Last week, we signed our first offtake contract to supply renewable methanol to this facility as part of a long-term agreement for the supply of renewable marine fuels. In hydrogen, during the quarter, we took the FID for our first large-scale electrolyzer. It's going to be constructed in Cartagena, and we are finalizing the analysis for the approval of another two projects. These electrolyzers will constitute the main part of our total capacity in operation by the end of this decade. Moving now to customer, this division delivered the highest quarterly result in the history of Repsol's commercial businesses. with all segments delivering higher contributions year over year. Third quarter adjusted income reached 241 million euros, 22% above the second quarter, and 34% higher than in the same period of 2024. EBITDA was 434 million euros, a 25% increase year over year, bringing the accumulated figure through September to 1.1 billion euros. This performance keeps us on track to deliver in 2025 the 1.4 billion EBITDA targeted for 2027 in our plan. So this figure is going to be achieved this year, 2025. And all that is supported by resilient demand, efficiency gains, growth in power and gas retail in Spain and Portugal, and the growth of aviation fuel sales in Iberia. In mobility, sales of road transportation fuels grew 14% year over year, reaching pre-pandemic levels. The non-oil business delivered robust contribution margin growth in service stations. 10% evolved the third quarter of 2024. As of today, 56% of our network in Spain offers multi-energy solutions. In October, the range of renewable fuels available at our service station has been stamped with the incorporation of 100% renewable gasoline after our Tarragona refinery achieved the first industrial-scale production of this product, a real technological milestone. Finally, in power and gas retail, we had 157,000 new customers last quarter for a total of 2.9 million clients by the end of September, on track to reach our 3 million target before year end. Turning to low carbon generation, the adjusted income reached 31 million euros, 24 million higher quarter over quarter, and 38 million increase year over year. These better results were driven by renewables, the main driver, a higher contribution from combined cycles whose activity increased to ensure system stability following the Spanish outage, the blackout we suffered in April. The average pool price in Spain was 67 euros per megawatt hour, 71 percent above the previous quarter and 16 percent below the same quarter in 2024. The power generated by Repsol reached 3.3 terawatt hour, 39% higher year over year. Repsol has reached five gigawatts of installed renewable capacity under operation, and we expect to add another 500 megawatts before year end, mainly driven by the startup of Pennington Solar in Texas. We keep, sorry, executing our business model based on building our projects from scratch and investing in early stages of production to optimize financial structure and maximize returns. In the U.S., the 629 megawatt outpost solar project achieved a commercial operation in September, joining Fry and the Jicarillas that are already producing in the country. We are now in the process of closing the partial divestment of this development, with cash-in expected in 2025. In Spain, an additional asset rotation is also under negotiation for a 700 megawatt renewable portfolio, of which, and that is an important fact seeing the current market situation, more than 400 are going. Finally, earlier this month we acquired and 805 megawatt wind pipeline with the aim of hybridizing production at our combined cycle plant in Escaton in the Spanish region of Aragon, securing the power supply for the future data center to be built in the area by a third party. Moving now briefly to a summary of the financial results. In this slide, you may find an overview of the figures that we have covered today. For further details, I encourage you to refer to the complete set of documents released this morning. Regarding our update outlook to the end of 2025, the cash flow from operations guidance remains unchanged at around 6 billion euros, with the benefit of a higher refining margin indicator, as I explained before. And this effect is going to be partially compensated by the lower price and weaker dollar. Net capex is unchanged at around 3.5 billion euros. I have the ambition to put this figure below 3.5 billion euros by the end of the year, subject to the timing of the divestment processes under execution. Upstream production remains at an estimate of around 550,000 barrels per day. We will allocate 1.8 billion euros to shareholder remuneration, 1.1 billion to cash dividends, and 700 million euros to share buybacks to reduce capital at the higher end of our strategic cash flow operations distribution range. Following July's second dividend payment, the total DPS distributed in 2025 has been €0.975 and an 8.3% increase over 2024. A first capital reduction was carried out in July through the redemption of shares acquired for an equivalent amount of €350 million and a second capital reduction for the same amount will be executed before year-end. For this, a new buyback program was launched in September for the acquisition of shares for the equivalent of 300 million euros. With a reminder, 50 million euros coming from the settlement of the 16 derivatives. In conclusion, Repsol is delivering on its commitments and the strength of our business model position us well to manage the uncertainties of the current environment. In the afternoon, we are improving the margin of the barriers we produce, bringing forward our growth projects and upgrading the portfolio in industrial we are capturing the positive momentum in refining while progressing on the transformation of our sites building resilience to ensure the long-term sustainability of the business customer keeps increasing its cash contribution to the group helped by a successful multi-energy story and a growing power retail business in iberia And in low-carbon generation, we continue to deliver along our strategic lines, targeting free cash flow neutrality after factoring the proceeds generated by asset rotation. Ensuring strong distributions to our shareholders remains a key priority in our story of value growth. Always, of course, maintaining a clear commitment to a robust balance sheet and our net capex objectives. Next year, after the share capital reduction executed in 2025, our ordinary dividend per share will be around 1.05 euro per share. I said around because that is going to depend on the exact figure of the shares we are going to redeem at the end of the current share buyback program. The same key strategic principles will guide our path. After the release of our full year results in February, and in light of the changes in the macroeconomic regulatory and business landscape that our industry has gone through, a capital markets day will be held in March, and where we will provide updated projections to 2028. 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. Before opening the Q&A, I would like kindly ask participants to limit yourselves to a maximum of two questions. If time permits, we will try to cover more in a second round. Of course, the IR team will be happy to assist you for any follow-ups afterwards. As usual, I would like the operator to remind us of the process to ask a question. Please go ahead.