Repsol Sa Sp/Adr

And good morning to everyone joining us today. Welcome to REPSOL's fourth quarter and full year 2025 results presentation. Today's conference call will be hosted by Josue Jonimath, 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 begin, let me remind you that 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 our disclaimer. With that, I will hand the conference call over to Joshua.

Thank you, Pablo. Good morning, and welcome to everyone. 2025 was a year of strong execution for Repsol. underscored by solid strategic delivery and progress on our path of disciplined growth. In a complex geopolitical and macroeconomic backdrop, we continue to advance our strategic priorities, enhancing the returns to our shareholders, strengthening the portfolio, and maintaining a consistent approach to capital allocation. Operating in a lower and volatile oil price scenario, performance remains robust across all four divisions. In the upstream, we continue to improve the business by bringing new growth projects on stream and optimizing the portfolio. In the industrial division, we continue advancing on the transformation of our sites, developing an scalable low-carbon platform within our Iberian hinterland. A positive refining momentum, especially in the second half, helped us to overcome the disruptions generated by the Spanish blackouts in the first part of the year. In customer, we leverage our brand scale and integration to develop an ambitious multi-energy offer, grow electricity retail, and reinforce profitability. And in low carbon generation, we continue to execute our business model for renewables, rotating assets to crystallize value and limit our exposure. All of this combined with the achievement of our key decarbonization target for 2025, as set in 2021, delivering a 15% reduction to the carbon intensity indicator. Other targets, such as methane emission intensity and routine flaring reduction, were met as well. Our capital allocation framework continues to prioritize shareholder remuneration, underpinned by a strong balance sheet and the delivery of disciplined and transformational capex. Last year, we increased the dividend by 8.3% to 975 euros per share. Total shareholder distributions were 1.8 billion euros, comprising 1.1 billion in cash dividends and 700 million in share buybacks to reduce capital, placing us at the higher of our strategic cash flow from operations distribution range. As we look ahead to our capital markets day next month, the same key strategic principles will guide our update roadmap to 2028. Ensuring a predictable and growing dividend complemented with buybacks will remain fundamental to the strategy. Let me underline this point. For 2026, under our planning scenario, distributions will continue improving with the cash dividend growing around 8% to 1.0 5.1 euros per share, and buybacks in line to 2025. Moving on to results as detailed in the documents you have in your hands released this morning, Repsol has implemented a new group reporting model by business segment. I know that that is complex, but let me say that the aim is to be fully transparent and adapting this reporting model to a new perimeter where we have minoritarian shareholders in some of our businesses, and that is pushing us to change to give you, in a transparent way, the more simplified information we can. The revised framework aligns our reporting with how the company currently manages and evaluates business performance. reflecting both the incorporation of strategic minority shareholders in two of our divisions and the increased relevance of joint ventures within our business model. In addition, the company seeks to align all its financial information with the financial statements prepared under IFRS, which are not impacted. The reporting segments remain unchanged. However, under the new model, The contribution of joint ventures previously integrated by proportionate consolidation is now recognized using the equity method. Upstream production and reserves will continue to be reported based on Repsol's effective interest in its joint ventures. The main measure of segment performance is the adjusted net income. Presented net of the income attributable to minority interest and excluding special items. For 2025, adjusted net income was 2.6 billion euros, a 15% decrease over the comparable figure in 2024. Cash flow from operations rose 5.4 billion euros, 8% higher year over year. Net capex stood at 2.7 billion euros, which compares to a 5.1 billion net investment in 2024. including the rotation of outposts announced in December and cash in this month, in February, net capex was 2.5 billion euros. Net debt closed at 4.5 billion euros, a 0.5 increase over 2024, and a 1.2 billion reduction over the third quarter of 2025. Excluding leases, net debt closed at €1.6 billion, so roughly 5% of the capital employed of the company. Year-end ratio stood at 14% by year-end, as I mentioned now, 5.5% excluding leases. Under the previous reporting model, full-year cash flow for an operation reached €6.1 billion, slightly ahead of guidance announced last time in October. and 13% higher over 2024. Net capex was 3.5 billion euros under the previous reporting model, so the former one, in line with guidance, and at 3.3 billion when we are including the outpost rotation that, as I mentioned, was catching this month in February. Looking briefly at the evolution of the main macroeconomic indicators in 2025. Brent price averaged $69 per barrel, 15% lower year on year, driven by OPEC production increases, geopolitical uncertainty, and commercial tensions. The Henry Hub averaged $3.4 per million BTU, 48% above 2024 figures, driven mainly by the continued ramp up of North American LNG exports, And in Europe, the TTF reference was 12% higher, mostly due to better demand and tighter inventory levels. Repsol's refining margin indicator increased 20% year-on-year, mainly due to stronger middle distillate differentials. And the exchange rate, the dollar, weakened against most major currencies, including Europe, averaging $1.13 per euro, a 5% depreciation versus 2024. Continuing with upstream performance, 2025 saw a strong delivery across the business as we continue to high-grade the portfolio with new projects and optimizing our legacy assets. Full year adjusted net income was 957 million euros, 7% lower year over year, reflecting lower oil realizations, a weaker dollar divestments, and a lower contribution from equity affiliates, partially offset by higher gas prices. Production averaged 548,000 barrels equivalent per day at the higher end of guidance and 4% lower than in 2024. The higher volumes in Libya and the UK were more than offset by divestments and natural decline. Excluding disposals, 2025 production was 2% higher year on year. In Libya, the stabilization of the country allowed us to reach our highest production level since 2012, exceeding 300,000 barrels per day in gross terms. In unconventional, representing around 30% of our volumes, we continue to accelerate activity in Marcellus and Eagle 4 as the markets evolve into a more bullish outlook for US gas. Development activity across the portfolio focused on the efficient delivery of projects for which we took FID in recent years. In Trieste and Tobago, the CIPOR and MENTOR projects reach first gas in April and May, respectively. In the Gulf of America, Leon Castile delivered first oil in September. In Brazil, Lapa Southwest is nearing completion and is expected to start up before the end of this quarter. And in Alaska, development of the first phase of PICA is close to full completion and expected to begin production in March. This flagship project with meaningful growth potential will contribute to reverse the great state of Alaska's production decline. Together, these G5 projects are expected to contribute 80,000 barrels of low break-even, low CO2 intensity barrels in 2027. With respect to portfolio management, we continue to strengthen our fundamentals through active management of our assets, making the business more resilient, transparent and profitable. Last year, we completed our exit from Indonesia and Colombia, consistent with our strategy to concentrate operations in more material and better margin geographies. In the UK, we completed a strategic agreement with New Energy to combine our assets in the North Sea, and in december the partners agreed to incorporate total energies uk to the venture repsol will own a 24 percent stake of the resulting entity to be called neo next a plus and the new company is projected to produce around 250 000 barrels a day in 2026. this alliance will allow us to unlock value by combining operational synergies with discipline financial execution Completion of the deal is expected in the first half of this year, 2026. In our upcoming CMD, we will have the opportunity to discuss in detail our next steps in this division. For 2026, our focus will be on Alaska's ramp-up to ensure we reach 80,000 barrels of gross production by the third quarter, the preparation for the liquidity event, and the resumption of operations in Venezuela. In this regard, last week, the US administration issued licenses that provide the legal framework we need to resume our oil and gas operations in the country. Continuing now with industrial, a full year adjusted net income was €963 million, €484 million below 2024, mainly due to a lower contribution from refining, chemicals, and the trade investment. The blackouts that impacted the Iberian Peninsula in April had a material impact on results. In the refining business, uncertainties around tariffs deteriorated the market environment in the first part of the year. A stronger diesel, gasoline, and NAFTA spread supported the gradual recovery of margins towards year end, with indicator reaching in November its highest level in more than two years. Repsol's margin indicator averaged $7.9 per barrel, $1.3 higher than in 2024. The premium of our indicator was $0.7 per barrel. The utilization of distillation capacity averaged 83%, which compares to an 88% rate in 2024, negatively, as I mentioned before, impacted by the consequences of the blackouts. And the conversion units operated at 95%, which compares to a 100% utilization rate in 2024. In 2026, the indicator has averaged $5.5 year to date. We expect margins to remain healthy, supported by improved economic activity, higher structural gasoline demand, and low inventories. In chemicals, Repsol's margin indicator was 20% higher than in 2024, mainly driven by lower feedstock prices. Even so, the business incurred a loss as market conditions remain challenging in Europe with flat demand, higher relative cost comparing with some other regions in the world, and large product imports. On this environment, we remain committed to our strategy of reducing break-evens, and expanding margins through differentiation. In this direction, the expansion of CNES in Portugal is expected to start operations in the second half of 2026. With regard to the transformation of our facilities, we continue to drive key initiatives in renewable fuels. Starting with Porto Llano, the retrofitting of a former gas oil unit to produce HVO is expected to commence operations next quarter. This facility will join our advanced biofuels plant in Cartagena to reach 0.5 million tons of production capacity per year between both plants, and a total of 1.5 million tons biofuel capacity at group level. A potential new retrofitting project is currently under evaluation. In Tarragona, construction of the EcoPlanta received approval at the beginning of last year, 2025. and the project moves ahead towards starting production in 2029. Repsol has already secured its first off-take contract for the renewable methanol to be produced in this facility. Finally, in renewable hydrogen, we took the final investment decision for our first two large-scale electrolyzers to be constructed in Cartagena and Bilbao with a capacity of 100 megawatt seats, and construction of a third large-scale electrolyzer in Tarragona progresses towards FID approval in coming months. Moving now to customer, full-year adjusted net income was €754 million, 17% over 2024, thanks to a higher contribution in all business segments. EBITDA reached €1.4 billion, a 20% improvement year-on-year, This implies achieving our 2027 strategic target two years in advance, perfecting the resiliency of our core legacy business, and also let me underline the increasing contribution from power and gas retail and our multi-energy offer to our customers. Immobility sales of road transportation fuels were 11% higher than in 2024, being now at the level of the pre-pandemic sales. The non-oil business delivers a robust contribution margin growth in Spain, up 12% year-on-year, and in aviation results benefit from sustained demand growth. Let me add that approximately 60% of our Spanish network already provides multi-energy solutions, with more than 1,500 service stations offering fuel that is 100% renewable. The number of digital clients reached 10.1 million by year end in December, a 16% increase over 2024, contributing to an increase of business to customer sales in service stations. While the app, you know, that is our app leading the Spanish retail businesses, keeps on growing in users and in transactions, reaching 89 million transactions in 2025, 10% evolve 2024. Finally, in power and gas retail, we add more than half a million customers, reaching a record figure of 3 million clients by December. Repsol has maintained a steady growth trend since we entered in this business in 2018, almost multiplying by four our customer base since the acquisition that year of Viesco. Turning to low carbon generation, we continue to execute our renewable strategy, bringing new projects into operation while rotating assets to crystallize value, maximizing returns and limiting our financial exposure. The adjusted net income reached 53 million euros, 77 million higher compared to 2024, supported by higher low carbon production. The average pool price in Spain was 66 euros per megawatt hour, 4% higher than in 2024. The power generated by Repsol reached 11.6 terawatts hour, 49% higher year over year. Renewable generation was 7.7 terawatts hour, 34% higher year on year. We add 2.2 gigawatts of new capacity under operation this year, 2025, achieving our objective for 2025 and bringing total capacity to 5.9 gigawatts by year-end. As of today, installed capacity has reached 6 gigawatts of renewable power. We were able to rotate 1.8 gigawatts through three different transactions in the U.S. and Spain. In the U.S., we divest a stake in a solar portfolio that included Frye and Jicarillas and reached an agreement to divest a stake in Outpost Solar Firm, including around 200 million tax equity. In Spain, we divest a participation in a 400 megawatt renewable portfolio in the first part of the of 2025. And let me say that since 2018, Repsol has developed and brought 5.1 gigawatts of wind and solar capacity into operation. One hundred percent of the more than three gigawatts fully commissioned have already been successfully rotated, with an average equity IRR above 10 percent. To date, 2.7 billion euros of capital has been captured through a combination of asset-level debt, tax equity investment, and value-accretive asset rotation strategies. Of the remaining capacity, 1.4 gigawatts are close to commercial operation date. Around 79% is currently at an advanced stage of negotiations. And to finalize, let me highlight that last year we had a new 805 megawatt wind pipeline for a Spanish portfolio with the aim of hybridizing production at our combined cycle in Escatron in Aragon, securing the power supply for the future data center to be built in this area by a third party. Regarding our Outlook, in our capital market day, we will provide the regular guidance for the period together with projection to 2028. For 2026, our planning assumptions are based on a rent price of $60 to $65, a Henry Hub of $3.5 to $4, and a refining margin indicator between $6.5 and $7.5 per barrel. In the upstream, we are expecting a higher production in a range from 560,000 to 570,000 barrels per day. Under this scenario, shareholders' distributions will continue improving, including cash dividends and share buybacks. The first buyback program was approved by the board yesterday. for up to 350 million euros and will start in coming days. Regarding our decarbonization pathway having delivered on the short-term commitments set for 2025, we will modulate medium-term goals while keeping long-term objectives according to the current regulatory and business framework. To summarize, 2025 proved to be another year of solid delivery for Repsol, with a strong progress across the priorities defined in our previous strategic update two years ago. And let me enumerate some of these progresses. First, between 2024 and 2025, we have allocated a total of 3.8 billion euros to remunerate our shareholders at the higher end of our cash flow from operations distribution range. We have increased the dividend per share by 39%, and we have reduced our capital by 9%, canceling 112 million shares. We have evolved our EMP portfolio into a more profitable business, which is now more resilient and predictable, and we have transitioned to more normalized capex levels. In industrial, we are accelerating efficiency and competitiveness, reinforcing the role of free cash flow generating trading business, and building an advantage low-carbon platform to reinforce our leading position in Iberia. In the commercial side, we are developing an ambitious multi-energy proposal that will strengthen Repsol's competitive position in our core markets. And in renewables, we continue developing a pipeline, rotating assets in early stage of production to deliver or require rates of return under the principle of unlimited capital exposure to this business. Considering this significant progress towards our targets and in light of changes to the macroeconomic regulatory and geopolitical backdrop next month in March, we will refresh our strategic framework. The core principles are growing and predictable remuneration, a strong balance sheet, and discipline growth will remain at the basis of our plan. We will share with you further details in less than three weeks, so see you then. With this, I'll turn it over to Pablo as we move on to the Q&A today. Thank you very much.

Thank you, Josion. Before opening the Q&A, I anticipate there is a lot of interest on the details of the Capital Markets Day to be unveiled in March. As you can imagine, at this point we cannot share details, so please adjust your questions accordingly. I would also 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. To begin, I would like the operator to remind us of the process to ask a question. Please, operator, go ahead.