Repsol reduces 2022 oil, gas guidance by 15,000 b/d amid disruptions in Libya output

Spanish integrated company Repsol has reduced its 2022 upstream oil and gas production guidance by 15,000 barrels of oil equivalent per day to 585,000 boe/d due to interruptions in Libyan upstream output as well as other factors, according to CEO Josu Jon Imaz April 28.

The production from El Sharara field in Libya, in which Repsol holds a 32% stake as operator, is currently at around 25% of capacity, or 70,000 b/d, following a force majeure declaration in mid-April, Imaz said.

This,coupled with an earlier outage in Libya in Q1, meant that the company expects production from the field to be 15,000 b/d lower than its initial estimate for the year.

Reductions elsewhere, such as Norway, would balance out with increased production from Venezuela, Peru and the US Marcellus field.

Repsol's production fell 12% year on year to 558,000 boe/d in Q1, the company's lowest first quarter total since the purchase of Talisman in 2015. The company had trimmed non-core upstream assets recently, such as those in Russia and Greece, to focus on 14 production areas.

One of these, the US Eagle Ford (100% Repsol) should receive a third rig during the year, while the Pikka field in Alaska, might see a final investment decision in July or August, Imaz said. The field has a cost-supply breakeven of $40/b and has been fully permitted. The output is estimated at 80,000 boe/d, of which 49% would net to Repsol.

Another FDI could also follow "soon" at the Gulf Of Mexico, according to Imaz.

Repsol raised net earnings from its upstream business by 124% year on year to Eu597 million ($627 million) as its average oil sale price increased 69% year on year to $91.70/b and its average realized gas price increased 121% to $7.50 per standard cubic foot.

Bullish downstream

The earnings downstream rose 223% year on year to Eur881 million in Q1, including a Eur656 million inventory effect, leading Repsol to nearly double its Ebitda forecast for the unit for the full year to around Eur1.4 billion.

The company is seeing refining margins approaching $20/b in April, according to Imaz, as the situation in Russia is tightening key markets, while a well-timed turnaround at its Bilbao refinery during Q1 has left the company in a position to fully exploit the European driving season.

The company's Spanish refining system (896,000 b/d) is currently at 96% utilization rate with the conversion rate at 98% from average rates of 94% and 86% for the whole month of April, Imaz said.

No further refinery maintenance is expected until Q4 when there would be work at Tarragona, he added.

As a result of the challenge in replacing Russian crude in the market, Repsol has taken on new suppliers, he said, without naming them, and rebalanced the refining mix to boost middle distillate production. This has given Repsol some arbitrage opportunities, mostly to neighboring France.

The diesel market has been particularly tight, but Imaz said that kerosene is making a comeback, with Spain's Madrid and Barcelona air passenger numbers back to 2019 levels during April.

The company is also bullish on petrochemicals due to its flexible refining system that has allowed it to substitute cheaper LPG for tight naphtha in its cracker feeds. The portion of LPG in its cracker feeds grew from 9% in Q1 2021 to 26% in Q1 2022, with the potential to reach between 40% and 45%, Imaz said.