Repsol YPF. Global Oil & Gas Conference 2004

Transcription

1 Repsol YPF Global Oil & Gas Conference 2004 June 2004

2 DISCLAIMER Safe harbor statement under the Private Securities Litigation Reform Act of 1995: This document contains statements that Repsol YPF believes constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of These forward-looking statements may include statements regarding the intent, belief or current expectations of Repsol YPF and its management, including with respect to trends affecting Repsol YPF s financial condition, results of operations, business, strategy, production volume and reserves, as well as Repsol YPF s plans with respect to capital expenditures and investments. These statements are not guarantees of future performance and are subject to material risks, uncertainties, changes and other factors which may be beyond Repsol YPF s control or may be difficult to predict. Repsol YPF s future financial condition, results of operations, business, strategy, production volumes, reserves, capital expenditures and investments could differ materially from those expressed or implied in any such forwardlooking statements. Such factors include, but are not limited to, currency fluctuations, the price of petroleum products, the ability to realize cost reductions and operating efficiencies without unduly disrupting business operations, environmental and regulatory considerations and general economic and business conditions, as well as those factors described in the filings made by Repsol YPF and its affiliates with the Comisión Nacional del Mercado de Valores in Spain, the Comisión Nacional de Valores in Argentina and the Securities and Exchange Commission in the United States; in particular, those described in Section 1.3 Key Information about Repsol YPF Risk Factors and Section 3 Operating and Financial Review and Prospects in Repsol YPF s annual report on Form 20-F for the fiscal year ended December 31, 2002 filed with the Securities and Exchange Commission. Repsol YPF does not undertake to publicly update or revise these forward looking statements even if experience or future changes make it clear that the projected results or condition expressed or implied therein will not be realized. 1

3 Maintaining Repsol YPF core businesses. Competitive Advantage / Higher Expected Returns FOCUS ON CORE BUSINESSES Production of crude oil and natural gas in Latin America, Caribbean, North Africa, with expansion to West Africa and Middle East. Marketing of natural gas and LNG, through integrated projects, in North and South America and Southern Europe. Refining, Marketing, LPG and Petrochemicals in Southern Europe and in South America. 2

4 Repsol YPF: : A Strategy For Value Creation Operating Excellence Financial Strength Profitable Growth Deconcentration VALUE CREATION 3

5 ... viable under a prudent scenario. STRATEGIC PLAN BASIS BRENT (US$/bbl) HENRY HUB (US$/MBtu) US$/ PESO/US$ TAX RATE (%) DOWNSTREAM MARGINS ACCOUNTING CRITERIA Mid cycle (*) Current Spanish GAAP (*) Mid cycle: R&M = Average of last 5 years; Chemicals = Last cycle average 4

6 Operating Excellence Continuous cost optimization COST SAVINGS ( ) M (Recurring Costs /Year) 660 Additional Cost Savings ( ) 900 New Target Previous Target (600M 2005) achieved during E 2007F 5

7 Financial Strength Demanding targets NEW TARGETS FINANCIAL RATIOS 15 25%: Net Debt/Capitalization 30-40%: (Net Debt+Prefs) / Capitalization 6

8 Financial Policy: Debt to Capitalization Ratio FFO Debt service Cash to shareholders Investment Ratio 42.9% (2001) TARGET RANGE 29.2% (2002) 24.3% (2003, 3Q) Net Debt / Capitalization (Net Debt + Preferred) / Capitalization 25% 40 % Long Term 15% 30% Medium term, while Argentina achieves recognized and sustained stability 7

9 Returning Cash to Shareholders FFO Debt service Cash to shareholders Investment PRINCIPLES Dividend should be payable under acid /low-cycle scenarios Buy backs as a complementary investment option LONG TERM POLICY Dividend Payout band around 40% of Net Income at mid-cycle NEXT STEP 2003: 0.40 /share (+30%) 8

10 Profitable Growth Within top range of oil companies ANNUAL PRODUCTION GROWTH (*) Repsol YPF ( ) 6% 4% 1 st Q 2 nd Q 3 rd Q 2% 4 th Q Companies Q=Quartile Source: Companies strategy presentations (*) Repsol YPF, Total, Eni, STATOIL, Conoco Phillips, BP, Shell, Chevron Texaco, Occidental 9

11 Deconcentration Improvement of risk profile OIL & GAS PRODUCTION % 28% 56% 44% Argentina ROW 10

12 Value Creation Improvement of ROACE >14% >9% 2007 ROACE (1) (1) Calculations under current Spanish GAAP (2) Adjusted: Pre-all goodwill (in NOPAT and Capital Employed) Not adjusted Adjusted (2) 11

13 Strategy in Exploration & Production E&P Solid current asset base Efficient and low cost operator Attractive portfolio of projects TOP RANGE PRODUCTION GROWTH WITH IMPROVING MARGINS 12

14 Portfolio of projects that maintains production in Argentina and growth in other areas... PRODUCTION GROWTH (Kboed) 1.400, 1.200, >5% C.A.G.R , Argentina Trinidad & Tobago ROW 13

15 ... in the planning period... NEW PRODUCTION PROJECTS Gulf of Mexico: Neptune Mexico Ecuador: OCP Venezuela: Yucal Placer, Quiamare, Barrancas Spain: Gaviota Expansion T&T: 4 th Train, Methanol, Others Libya: A, B, D, N, O & M1 Bolivia: GSA, Surubí-Mamoré Argentina Brazil: Albacora Leste 14

16 ... and beyond... GROWTH BEYOND 2007 Gulf of Mexico T&T: 5 th Train Spain: Canary Islands Algeria: Reggane & TFT Kazakhstan Cuba Middle East: Iran, Qatar, Venezuela: Plat. Deltana, West Venezuela Bolivia: Pacific LNG West Africa Brazil Argentina Libya: Murzuq, Sirte, LNG Pending approval Medium & High Risk Exploration Low Risk Exploration Under Negotiation 15

17 ... maintaining leadership position on costs E&P COSTS (US$/boe) Finding Costs F&D Costs Lifting Costs Industry: average RY: average(e) Source: PFC Estimates based on SFAS 69 Activities 16

18 ... with an improvement in margin per barrel. E&P: MARGIN IMPROVEMENT (*) Brent : 18 US$ / bbl Base 2002 = 100 (without crisis) > 10% Margin mix improvement: T&T Libya Albacora Leste, Cost competitiveness from devaluation in argentina Cost savings (*) Margin = revenues production cost royalties tech. amortization 17

19 Strategy in Gas GAS Strong position in gas reserves Experience in integrated LNG projects Leadership in markets with high growth PROFITABLE GROWTH BASED ON INTEGRATED CHAINS 18

20 Strong position in natural gas reserves Repsol YPF 3P NET RESERVES: 39 TCF (1,100 bcm) Venezuela Trinidad & Tobago Bolivia Argentina Exploration potential not included 19

21 ... which sustains a profitable growth strategy, based on integrated chains. Upstream Midstream Downstream Southern Cone Argentina: Neuquen, NOA Bolivia Pipelines: BTB ARG-CHI, ARG-BRA Argentina: Metrogas, BAN Brazil: CEG, CEG-RIO, SPS Atlantic Trinidad&Tobago Venezuela Atlantic LNG Spain: GN, BBE/G USA: LNG terminals Caribbean: LNG terminals Pacific Bolivia Pacific LNG Mexico: GN Mexico, LNG terminals USA: Market agreements Middle East / North Africa Iran, Libya Qatar LNG Projects Spain: GN Italy: GN, LNG terminals Far East: Market agreements 20

22 Experience in integrated LNG projects... BRINGING RESERVES CLOSER TO MARKETS #1 USA LNG supplier Gas Production Present Gas Market Future Gas Market Present LNG route Future LNG route #2 Global LNG trader Note: Includes 100% of Gas Natural sdg 21

23 Refining & Marketing strategy R&M Leading positions Growth markets QUALITY EARNINGS 22

24 Flexible & Integrated Refining Systems Brazil Spain 58.3 tb/d (3%) tb/d (59%) La Pampilla Peru tb/d (54%) Conversion: 13% Refinor (Share 50%) Conversion: 11% Manguinho s (Share 30,71%) Coruña Conversion: 38% Bilbao Tarragona Luján de Cuyo Plaza Huincul La Plata REFAP (Share 30%) Argentina tb/d (54%) Conversion: 67% Puertollan o Cartagena Oil Production Refineries ( = 30 tbcd Interest) Marketing / LPG (33/3 Million Tons/year) Crude Oil Pipeline (2,464 km) Oil Product Pipeline (5,225 km) NB: Conversion expressed as the ratio of FCC equivalent capacity to topping capacity 23

25 Refineries of Global Scale & Complexity Average Topping Capacity Conversion Ratio tb/d % 60% 50% 40% 30% 20% Southern Cone Europe (NWE, MED) Repsol YPF Regional Average FCC-Equivalent Conversion Ratio Overwhelming advantage in Southern Cone On par in Europe, even with significant presence of super-majors Advantage also in terms of relative profitability, and in terms of relative preparedness for future EU product specs 10% 0% Southern Cone Repsol YPF Europe Regional Average Repsol YPF indices include all assets with more than 30 tb/cd of consolidated topping capacity Source: WE and Latin America Average based on capacities from O&G Journal

26 Refining Cost Cash Operating Cost (US / UEDC) 25,9 28,9 Western Europe 18,8 45,1 Leverage refining and logistics positions and growth in marketing in neighbouring countries Increase refining complexity Focus on reducing costs Expand the retail offering in Spain and neighbouring countries 22,2 38,4 Latin America 16,4 116,3 Source: Solomon Fuels Performance Analysis 2002 Above average performance in cash operating cost in Spain and Latin America Continue to focus on cost reduction programs 25

27 Refining Margin Growth US$/barrel Growth in Refining Margin The most important investments are designed to improve efficiency and safety, and upgrade capacity to meet the new EU fuel specifications The investment program to meet the 2005 specs includes hydrocracker at Tarragona (startup 2002) mild hydrocrackers in Puertollano and Coruña (start-up mid 2004 and end 2004, respectively) Conversion Efficiency improvement and cost reduction Total margin improvement Improvement achieved Upgrading projects are also being developed in La Pampilla, REFAP and Cartagena refineries (start-up 2004, 2005 and 2007 respectively) 26

28 to Increase Non-Oil revenues in Spain Lever age r efini ng and l ogistics posi tions and gr owth in marketing in neighbouring countries Incr ease r efi ning compl exity Index 2002=100 Focus on reduci ng costs Expand the retail offering in Spain and neighbouring countries Non oil revenues Source: Repsol-YPF projections Oil revenues COCOs Growth supported by expanding product range and introduction of new services New & better c-stores Do-it-yourself carwash CODOs & DODOs Development of franchised sites also supports high growth in non-oil income 27

29 Strategy in Chemicals CHEMICALS Integration Technology Operating excellence PROFITABILITY 28

30 Chemicals Main petrochemical assets Petrochemical Plant Refinery Santander La Coruña BASE. 60 DERIVATIVE DYNASOL (50%) Bilbao BASE.. 80 Altamira DERIVATIVE DYNASOL (50%) MEXICO DF (2000). Puertollano BASE BASE DERIVATIVE Tarragona BASE BASE.... 1,285 DERIVATIVE..1,477 Plaza Huincul DERIVATIVE Bogotá Ensenada BASE DERIVATIVE PETROKEN Río de (50% Janeiro YPF) Buenos Aires Bahía Blanca (1) DERIVATIVE (1) 50% de Profertil PBB POLISUR (28%) 2003 Sales in Spain: Kt 2003 Sales in Argentina: 662 Kt 29

31 ... and a high operating efficiency... PRODUCTIVITY (*) COST REDUCTION (*) + 9% C.A.G.R. + 9% C.AG.R. -3% C.A.G.R. -4% C.A.G.R X 3-30% (*) Sales (t / employee) (*) Cost without main raw materials and depreciation ( 2002 / t sold) 30

32 Investment program summary (1) FFO Debt service Cash to shareholders Investment CAPEX TOTAL = 18,800 M Refining: 44% Exploration (*) : 14% LPG: 20% R&M 26% Gas 8% E&P 60% LNG: 15% Marketing: 36% Chemical s 6% Development: 71% (*) Includes all exploration expenses 31

33 Investment program summary (2) CAPEX BY REGION % 28% 46% Argentina Spain ROW 32

34 Conclusion MAIN TARGETS OIL & GAS PRODUCTION: ROACE: DEBT RATIO: COST SAVINGS: DIVIDENDS: >5% C.A.G.R. ( ) >14% (2007) 15 25% 900 M p.a. by 2007 vs 2001 Up to 40% Mid-Cycle Payout 2003: 0.40 /share (+30%) 33

35 NATURAL GAS MARKET IN ARGENTINA 34

36 Primary Energy Consumption ,6% 50,8% Oil Gas Coal Nuclear Hydro 35

37 Gas demand Mm 3 11, % Mm 3 40,000 3,4% 12% 5, Q 03 1Q 04 20, Power Gen. Residential & Commercial Industries 36

38 Increase in Gas demand Higher conversion to gas in the industrial sector CNG conversion for vehicles Increase demand by utilities Increase in gas consumption: 0.8 Bscf/d 37

39 Situation of natural gas market in Argentina Supply evolution One of the main existing problems, in the supply side, is the limited transmission capacity in certain areas. This makes unefficient any increase in the gas production. 100% Capacidad utilizada invierno Average load factor-winter 90% En proyecto.bolivia-nea 80% 70% 60% 50% TGS TGN 38

40 Evolution of Gas Price realisation US$/mscf Q 04 39

41 Consumer breakdown by tariff type Dollarised industries Exports Industries >9,000 M 3 /y Power generators Compressed natural gas 37% 45% 18% Residential & Commercial <9,000 M 3 /y 40

42 Correcting the distortions in the market Progressive liberalization of the market for: Industries Power generators Compressed natural gas Spot market for gas will be created Obligation to release transportation capacity Prices will be risen in 4 steps 41

43 Price schedule Exports + Dolarised industries Liberalized in 2002 >9,000 M 3 /y May 04 Oct 04 May 05 Jul % 16% +16% +16% +110% <9,000 M 3 /y Liberalization by Dec 06 42

44 Medium term outlook Moving in the right direction of gas liberalization Bolivia will accelerate its monetization of gas reserves Prices will be set according to market forces Argentina, Brazil and Bolivia will become interlinked markets Bolivia will be long run marginal supplier 43

45 RESULTS 44

46 General Environment $/ Exchange Rate Peso/$ Exchange Rate Q 03 4Q 03 1Q 04 1Q 03 4Q 03 1Q 04 US dollar weakness and peso strength Brent Dated ($/bbl) Brent Dated ( /bbl) 1Q 03 4Q 03 1Q 04 1Q 03 4Q 03 1Q 04 Increasing oil prices in $, but decreasing in euros ($/bbl) ( /bbl) 1Q 03 4Q 03 1Q 04 1Q 03 4Q 03 1Q 04 Refining margins upward trend continues, but still below than 1Q

47 Highlights 1Q 2004 vs. 1Q % production growth in oil&gas Similar refining capacity utilisation despite turnarounds Higher marketing sales Worldwide LNG sales quadrupled Close to 60% growth in Atlantic LNG operations Tax rate increase to 38% Reduction of financial expenses Strong free cash flow generation 46

48 1st Quarter Results Net Income Operating Income 1,000 1, % -22.6% Million 700 1,129 1, Q 03 4Q 03 2Q Q 03 4Q 03 1Q 04 1,000 1, % -9.9% Million $ 700 1,210 1, Q 03 4Q 03 1Q Q 03 4Q 03 1Q 04 47

49 Comparison 1Q 40 VS. 1Q 03 REPORTED Adj. by /$ Exchange Rate + + Adj. by Tax Rate Operating Income -11.3% +3.2% +3.2% Net Income -22.6% -9.9% -0.4% Adj. Net income -15.9% -2.1% +6.7% After tax Cash Flow -7.6% +7.5% +13.3% 48

50 1st Quarter Results Million euro Operating Income 1, , ,129 1, mar-03 E&P Prices Down. Margins Volumes Inventories Consolidation $ / euro Others mar-04 49

51 Net Debt Evolution ,670 17, , , , ,739 7,472 7, , , ,047 5, ,000 7,500 5, , Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 0 NET FINANCIAL COST NET DEBT Million euros 50

52 Liquidity as of March 31st, 2004 MM Euro Cash and Cash equivalents Other financial investments Total Financial Investments Committed Credit lines Of which used (101) LIQUIDITY AS OF MARCH 31 ST,

53 Conclusions Implementation of strategy on track: Operating Excellence Financial Strength Profitable Growth Deconcentration Argentina: Gas prices moving in the right direction Robust results and strong free cash flow generation 52

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