Spanish oil major Repsol said on Wednesday its net profit could fall by up to 22 percent in 2015, hit by low crude prices and a loss of value of a few of its North-American assets which will trigger a big impairment charge in the third quarter.
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Costs savings elsewhere would also save €2.1bn a year said chief executive Josu Jon Imaz, who warned the outlook was challenging.
The move comes less than a year after Repsol bought Canada’s Talisman for $8.3 billion, a deal that has boosted its production but which swelled its borrowing. “We have to focus where we are better than others or where we can compete with others”.
That would enable the group to generate around 10 billion euros of cash that would be used to pay back its debt and secure one of the highest dividend yield among Spain’s blue chips.
Yet, the announcements were received cautiously by investors.
Repsol had already announced earlier this month that it planned to cut 1,500 positions, or six percent of its workforce, over the next three years as part of its effort to boost its refining margin.
Analysts welcomed the steps taken by the management to ease the financial pressure on the group’s balance sheet but said delivering a few of the targets will be tough to achieve.
“They are important, but not relevant”, he said.
Repsol said it saw net profit reaching a range of between 1.25 billion and 1.5 billion euros ($1.43-1.72 billion) at the end of 2015, down from the 1.61 billion euros in 2014.
The company said however that its key raw measure of earnings before interest, taxes, depreciation and amortization was set to strengthen this year to between 5.2 billion and 5.45 billion euros.
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After a period of growth culminating in the purchase of Talisman, the 2016-2020 Strategic Plan will implement a series of initiatives which aim to double EBITDA (at CCS) to 11.5 billion euros.
