Repsol YPF said Tuesday it had discovered in Libya its largest ever oil field, which will double its production and reserves in that country, but that fourth-quarter profit fell 14 percent on lower output and higher exploration costs.
Chairman Antonio Brufau said the discovery in Libya was the first sign that Repsol's strategic shift toward a heavier emphasis on oil and gas exploration, started soon after he took over in late 2004, "begins to bear fruit."
The oil field, located in Libya's Murzuq basin, holds 474 million barrels of oil, Repsol said in statement. The discovery was made by Repsol Oil Operations, a joint venture between the Spanish-Argentine company and the National Oil Co. of Libya.
Repsol produces about 250,000 barrels a day of crude oil in Libya. Its total output fell 1.4 percent in the fourth quarter to 1.1 million barrels of oil equivalent a day.
That hurt net income for the period, which fell to euro473 million (US$622.47 million) from euro549 million in the same period the previous year.
Adjusted net profit - the company's preferred measure of profitability, excluding minority interests and nonrecurring items - came to euro547 million (US$719.85 million) for the three months to Dec. 31, compared with euro998 million in the same period of 2005.
That came in lower than the expectations of analysts surveyed by Dow Jones Newswires, and Repsol shares fell 1.4 percent at euro24.83 (US$32.68) in Madrid trading. The shares have gained about 25 percent in the past year, despite continued problems with reserves and production, as the company has been considered a possible takeover target.
Repsol said the decline in production was mostly due to contract renegotiation in Venezuela and lower oil output in Argentina.
Like most other oil companies, Repsol has been affected by rising exploration costs and higher taxes in the countries where it owns reserves. As a result, the adjusted operating figure in its exploration and production division tumbled 45 percent in the fourth quarter.
Brufau said Repsol does not anticipate further reserves downgrades in its current markets, and plans to invest around euro1 billion (US$1.32 billion) into exploration in 2007.
He noted that around euro650 million (US$855.4 million) of that will correspond to countries outside the traditional footprint of the company - Argentina, Bolivia and Brazil - with a focus on new markets such as Libya, Algeria and the Gulf of Mexico.
"Our exploration activity, which was historically very low, is going to be much more intense now," Brufau said.
He was cautious, however, about the immediate effect of the increased exploration and said Repsol's output is likely to remain around 1 million barrels per day during 2007.
source news : kiplingerforecasts.com
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