Strategic Plan Investor Update

Transcription

1 Strategic Plan Investor Update June 2014

2 ALL RIGHTS ARE RESERVED REPSOL, S.A Repsol, S.A. is the exclusive owner of this document. No part of this document may be reproduced (including photocopying), stored, duplicated, copied, distributed or introduced into a retrieval system of any nature or transmitted in any form or by any means without the prior written permission of Repsol, S.A. This document does not constitute an offer or invitation to purchase or subscribe shares, in accordance with the provisions of the Spanish Securities Market Law (Law 24/1988, of July 28, as amended and restated) and its implementing regulations. In addition, this document does not constitute an offer of purchase, sale or exchange, nor a request for an offer of purchase, sale or exchange of securities in any other jurisdiction. Some of the resources mentioned in this document do not constitute proved reserves and will be recognized as such when they comply with the formal conditions required by the U.S. Securities and Exchange Commission. This document contains statements that Repsol believes constitute forward-looking statements which may include statements regarding the intent, belief, or current expectations of Repsol and its management, including statements with respect to trends affecting Repsol s financial condition, financial ratios, results of operations, business, strategy, geographic concentration, production volume and reserves, capital expenditures, costs savings, investments and dividend payout policies. These forward-looking statements may also include assumptions regarding future economic and other conditions, such as future crude oil and other prices, refining and marketing margins and exchange rates and are generally identified by the words expects, anticipates, forecasts, believes, estimates, notices and similar expressions. These statements are not guarantees of future performance, prices, margins, exchange rates or other events and are subject to material risks, uncertainties, changes and other factors which may be beyond Repsol s control or may be difficult to predict. Within those risks are those factors and circumstances described in the filings made by Repsol and its affiliates with the Comisión Nacional del Mercado de Valores in Spain, the Comisión Nacional de Valores in Argentina, the Securities and Exchange Commission in the United States and with any other supervisory authority of those markets where the securities issued by Repsol and/or its affiliates are listed. Repsol does not undertake to publicly update or revise these forward-looking statements even if experience or future changes make it clear that the projected performance, conditions or events expressed or implied therein will not be realized. The information contained in the document has not been verified or revised by the Auditors of Repsol.

3 Company Overview Repsol: A Transformation Story Strategic Plan : Growing from our strengths Financial Outlook Environmental, Social & Governance Summary

4 Strategic Plan

5 Norway Russia Canada Netherlands Ireland Mexico USA Aruba Italy Spain Portugal Venezuela Tunisia Morocco Algeria Trinidad & Libya Tobago Mauritania Romania Bulgaria Nicaragua Colombia Ecuador Peru Guyana Sierra Leone Brazil Liberia Angola Kurdistan Indonesia Bolivia Namibia Australia E&P R&M Core Businesses Non Operated Shareholding E&P / R&M Upstream Downstream Gas Natural Fenosa 5

6 Total number of shares as of June 2014: 1, million. Updated June 3, 2014 Caixabank Sacyr Temasek Free Float (*) 11, , , Free Float 72,68 (*) On 11thNovember 2013 CaixaBank launched a 594m 3-year Mandatory Exchangeable Bond into Repsol shares (2.5% of share capital)

7 Note: Repsol Group made the decision in 2014, prompted by the business reality and in order to make its disclosures more comparable with those in the sector, to disclose as a measure of the result of each segment the recurring net operating profit at current cost of supply (CCS) after tax of continuing operations ( Adjusted Net Income ), which excludes both non-recurring net income and the inventory effect. For more information please refer to section Basis of preparation of the financial information of the 1st Quarter 2014 earnings release. 7

8 (4) Economic data ( Million) 1Q Q Q 2014 (1) EBITDA 1, ,177 CAPITAL EXPENDITURES NET DEBT + PREFERENCE SHARES 6, ,722 EBITDA / NET DEBT + PREFERENCE SHARES (x) CAPITALIZATION (1) 1Q (1) As of June 5th

9 Strategic Plan

10 Portfolio Management (4) Options to materialize value from our balance sheet through selective divestments (1) Accomplishing the transformation of Repsol Upstream into the Group's growth engine Very successful exploration activity leveraged on increased investment and technical expertise Outstanding results in reserve replacement Delivering key growth development projects on time and on budget Optimize return return on on capital capital and and improve improve competitiveness through through targeted conversion expansion Leading competitive position as an integrated player in Spain and Europe. Repsol among the European companies with highest conversion Solid cash generation from premier integrated position in the European downstream 10

11 FID (1) (1) Start up (4) New areas of Exploration Norway GoM European Atlantic Namibia Alaska Brazil Carioca (Lapa) Brazil Sapinhoa (Guará) Libya I/R Cartagena Angola Liberia Colombia Kurdistán Bulgaria Canada Russia Brazil BM-C-33 GoM Buckskin Algeria Reggane Venezuela Perla Peru Kinteroni Venezuela Carabobo Canada Canaport Lubina- Montanazo Bolivia Margarita- Huacaya US GoM Shenzi US Midcontinent Bilbao Russia AROG Gabon Prospective Evaluation Construction Operation Stage of Advance (1) FID: Final Investment Decision Upstream Downstream LNG 11

12 Strategic Plan

13 High growth in Upstream Maximize return on capital Downstream Financial strength Production growth (1) : > 7% CAGR (1) RRR (2) : > 120% (+120% vs. average ) Upstream average capex: 2.9bn/year (3) Downstream average Free Cash Flow: 1.2bn/year Downstream average capex: 0.7bn/year (-50% vs. avg ) Self-financed plan generating bn cash for dividends & debt reduction in base case, resilient to stress scenario Maintain investment grade rating Divestments & treasury stock: up to bn in (4) Competitive shareholder compensation Dividend 2012: ~1 /share (scrip option) Repsol Flexible Dividend program 64%, 69%, 59% and 63% acceptance ratio. 1 /share Extraordinary dividend from 2014 earnings, AGM approved an optional Share buyback program 0,5 Bn or 2,05% of capital 1. Compound annual growth rate. 2. Average Reserve Replacement Ratio Net Capex. excluding G&G and G&A 4, Targets in Target more than achieved after LNG disposal. Up to date divestments: 10% of treasury stock ( 2.4bn); LPG Chile & Amodaimi ( 0.6bn); LNG business ( 4.4bn) and 10% stake in TPG (219 M$) 13

14 Our businesses strategy:

15 Reserve Replacement Ratio % % % % RRR (2) > % Exploration Capex: USD 1.0bn/year Including drilling, G&A and G&G 2013 U$ 1.1 Bn 2014 (E) US 1.3 Bn Additions to Proven Reserves: +200/250 Mboe # Wells/year: % focused on liquids 2013: (E): 31 Contract application and movements of resources to reserves Contingent resources/year (risked): +300/350 Mboe WI prospective resources evaluated/year (unrisked): +1,500 Mboe Success ratio: 20-25% (1) 1. Historical success ratio above 30% 2. Average RRR (Reserve Replacement Ratio) beyond

16 2014 Maintaining speed Targeting +30 wells (includes contingencies, from 40 in inventory) Around 1.3 billion barrels in working interest to investigate Main drilling activity forecasted for Angola, Libya, Brazil, USA, Russia, Norway and possibly Colombia. Other plays investigated are Kurdistan, Namibia, Romania, Mauritania, Liberia and Canada 2015 Cruising (1) 30 wells, 2/3 wildcats, 1/3 appraisals Around 1.5 billion barrels in working interest to investigate Main drilling activity forecasted for Angola, Algeria, Colombia, Brazil, Libya, USA, Russia, Norway, Romania, Peru and Canada. Expected resources from 2015 around 300 MBOE Expected resources from 2014 again above 300 MBOE (1) Preliminary 16

17 Alaska Norway Russia Offshore Canada Ireland Spain Romania Portugal Iraq GoM Offshore Colombia Mauritania Algeria Libya Nicaragua Liberia Brazil Angola Indonesia Namibia Operated Operated & non operated Non Operated 31 wells to be spudded during

18 USA Low risk of delivery: 7 projects already producing Mid-Continent 40 Kboed (1) net production (1) - FO: 2012 Capex 12-16: 2.3bn Russia AROG (Russia) 50 Kboed WI: 49% - FO: 2012 Capex 12-16: 0.4bn Africa & Europe Reggane (Algeria) 48 Kboed WI: 29.25% FID: 2009 FG: 2016 Capex 12-16: 0.4bn Lubina- Montanazo (Spain) 5 Kboed WI: % FID: 2009 FO: 2012 Capex 12-16: 0.02bn North Latam Margarita-Huacaya (Bolivia) 102 Kboed WI: 37.5% FID: 2010 FG: 2012 Capex 12-16: 0.3bn Kinteroni (Peru) 40 Kboed WI: 53.8% FID: 2009 FG: 2012 Capex 12-16: 0.07bn Carabobo (Venezuela) 370 Kboed WI: 11% - FO: 2013 Capex 12-16: 0.7bn Cardon IV (Venezuela) 53 Kboed(2) WI: 32.5% FID: 2011 FG: 2014 Capex 12-16: 0.5bn Brazil Sapinhoa (Guara) 300 Kboed WI: 15% FID: 2010 FO: 2013 Capex 12-16: 1.2bn Lapa (Carioca) 150 Kboed WI: 15% FID: 2012 FO: 2016 Capex 12-16: 0.8bn Key growth projects increasing Repsol net production: more than 200 Kboed in Note: all production figures indicate gross plateau production; WI = Repsol Working Interest; FID = Final Investment Decision; FO: First Oil; FG: First Gas; Net capex , excluding G&G and G&A. 1. Average Repsol net production post royalties 2. Phase I gross production Contingent resources Alaska Campos -33 ( Gavea, Pao de Açucar and Seat) Presalt Albacora-Arapuca Buckskin Malombe Piracuca Sagari Algeria-TDE Libya- Waha & NC200 Sagitario BMS-50 Post 2016: Next wave of growth GoM Beaufort Sea Louisiana East Canada Campos, Santos & Espirito Santo Colombia RC11, RC12, Cosecha & Tayrona Prospective resources Aruba Guyana Angola and Namibia Spain and Portugal Norway offshore Peru: Mashira. Mapi Gabon-offshore Irak-Kurdistan Rumania (Targovist e-baicoi) 18

19 CAGR (1) >7% Reserve Replacement Ratio (3) (kboed) Net Production kboed kboed 1Q Kboed (2) RRR % Reserves ,515 Mboe Contingent Resources Bn boe Bn boe Production entirely based on current assets + growth projects 2016 production target not built neither on contingent nor prospective resources from exploration Annual addition of contingent resources through exploration: +300/350 Mboe (4) With a notable improvement in reserve replacement, without exhausting contingent resources bank 1. Compound annual growth rate : Expecting production growth in 2014 of around 7% excluding Libya. (Excluding the contribution of Libya in both years (2013 & 2014) : Disruptions in Libya caused a reduction of approximately 12 Kboed. 1Q14: Disruptions in Libya caused a reduction of approximately 24 Kboed. 3. Cumulative contingent resources 4. Risked resources 19

20 Our businesses strategy:

21 Maximization of Integrated Margin in Downstream Refining Reduce energy costs Fuel consumption & losses down by 6% at 2016 Reduce CO 2 emissions by 15% at 2016 Operational excellence program in refineries Marketing Petrochemicals Maximize value of integration with refining. Competitive Plan: Higher-value applications Efficiency program Continue cost reduction program LPG Maximize value of marketing assets and competitive position Optimize retail asset portfolio Increase non-oil margins Increase international margin from lubricants and specialties Adequate production and commercial capacity to market conditions in Spain Optimize portfolio 21

22 Competitive Downstream business, linked to quality assets and geographical situation Integrated R&M margin (Repsol vs. Sector) Presence in a premium market for refining Completion of expansion and conversion projects Integrated refining portfolio, working as a unique system Efficient integration between the refining and marketing businesses Repsol margins Industry peer group maximum margin Industry peer group minimum margin Note: Integrated R&M margin calculated as CCS/LIFO-Adjusted operating profit of the R&M Segment divided by the total volume of crude processed (excludes petrochemical business) of a 14-peer-group. Based on annual reports and Repsol s estimates. Source: Company filings 22

23 Improved competitiveness of refining assets Oil pipeline Repsol Oil pipelines CLH % FCC equivalent CORUÑA BILBAO 100% 1Q 2Q 3Q 4Q 80% TARRAGONA 60% 40% PUERTOLLANO CARTAGENA 20% 0% Europe Mbpd Increased competitiveness of refining assets Top quartile position among European peers along the cycle Divested non-core / low return assets ( 1.4(1)bn) (MTm) Middle distillates production +25% % FCC equivalent Conversion +20pp Includes sale of 15% of CLH, non-integrated Downstream in LatAm (Chile, Brazil and Ecuador), PMMA Petrochemicals, Refap in Brazil and LPG France, some of them executed in Dec Data source: WoodMackenzie 23

24 Fully invested asset portfolio and portfolio management Maximize margins and return on investment Refining margin to increase approx. 3 USD/bbl in 2016 due to new projects Leading middle-distillate yield in short neighboring markets Continue selective divestments of non-core assets during period Investment in Downstream of 0.7bn/year in (vs. 1.6bn/year in ) Profit improvement through operational excellence and efficiency Operational excellence and debottlenecking initiatives Integrated margin enhancement Exploit focused high-value growth options with low capital requirements Leverage our premium portfolio to exploit in high return niche opportunities 24

25 Downstream EBITDA Downstream CAPEX ( bn/year) ( bn/year) Higher margins largely derived from expansion and conversion projects Downstream investment cycle already finalized 25

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27 A liquid asset, with growth capabilities and a strong cash flow generator Leading Utility An European leading utility company with a strong footprint and growth in Latin America. Dividend Yield Strong cash stream for Repsol via Dividend. A Good option A financial investment that could be used after the LNG sale is completed and if a good opportunity in the upstream business arises. Strong LatAm footprint, growth and strong cash generation. 27

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29 US$ 6.3 Billion obtained in the following transactions (1) : Bond Date US$ Billion BONAR X 5/16/ DISCOUNT 33 5/16/ BODEN 15 05/16/14-05/27/ BONAR /13/ YPF STAKE % Stake 5/7/ % Stake 5/12/ TOTAL 6.3 (1) US$ 6.3 Billion includes all accrued interest received in all bond transactions. 29

30 Positive Outlook Stable Outlook On May 15 Fitch upgraded Repsol s Long-term rating from BBB- to BBB and S&P reviewed its outlook to Positive. On May 20 Moody s upgraded Repsol s long-term rating to Baa2 from Baa3 and the short term rating to Prime-2 from Prime-3, both with stable outlook. 30

31 Net Debt 4.7 bn 3.6 bn 1 bn 1 bn 1.3 bn 1.5 bn 1Q2014 Sale of Argentinean bonds Sale of YPF shares Extraordinary Dividend 1Q2014 Pro forma 1Q 14 Pro forma liquidity covers more than 5 times short term debt 31

32 Capex 2013 = 3.1 bn Capex 2014(E) ~ 3.6 bn Cumulative Capex (1) ( ) - bn UPSTREAM LNG (3) DOWNSTREAM CORPORATION TOTAL Producing Assets Growth projetcs & Future developments (2) & Exploration % CAPEX in Upstream 1. Net Capex, excluding G&G and G&A 2. Future develoments include proyects with start-up of production beyond From 2014 onwards no investment forecasted Note: all calculations ex-gas Natural Fenosa and YPF 32

33 2,50 Dividend Yield = ( Gross Dividend during Year / average share price during year) (1) 2,00 1, (2) 1,00 0, (1) Dividen yield calculated with Jun 14 closing Price (2) On May 28th, 2014, The Board of Directors agreed to distribute an extraordinary dividend of one euro per share from 2014 earnings, with payment day on June 6th, (3) In addition, the Board of Directors approved the timetable for the execution of the paid-up capital increase, approved by the Shareholders Meeting in the framework of the Repsol Flexible Dividend program. *** It is expected that, in accordance with the formula approved by the Shareholders Meeting and considering as Share Price the closing price of Repsol shares on 27 May 2014 (20.60 per share), the approximate price at which Repsol will purchase 33 rights will be per right. (3)

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35 ENERGY & CARBON Tracks & reports energy and carbon intensity KPIs. Strategy for reduction in our entire value chain. GHG emission reduction target. More than 2,5 million CO2eq emissions reduction in the period Conduct sensitivity analysis of the impact of energy prices on company s financials. R&D for ecodesign of products. Development of non fossil energy: bioenergy, renewable electricity generation and transport electrification. Environmental Strong and detailed Environmental Management systems verified by third parties. Environmental issues are identified, studied and minimized throughout the entire lifecycle of industrial assets. Use of most recognized water risk assessment tools in the Oil&Gas. 35

36 SOCIAL GOVERNANCE Lost-time injury frequency rate shows a decreasing trend. Corporate Regulation to assess potential impacts on human rights under the United Nations "Protect, Respect and Remedy" framework. Strong regulation on Relations with communities, specially regarding Indigenous peoples. We engage with local communities to gain informed consent for all major projects, committing to maximize positive aspects and opportunities to generate shared value and to prevent and minimize negative impacts through dialogue and community involvement. Standards for suppliers covering issues such as, HR and ethics; and safety and environment issues. Accountability and integrity underlined by centralized risk & crisis management framework. Transparency. Integration of sustainability into making decision process. Anti-corruption program covering all relevant aspects and business relationships. 36

37 Repsol led the Oil & Gas sector for two consecutive years, 2011 and 2012 (2 nd position in 2013) the prestigious Dow Jones Sustainability Indexes. The company also leads the Oil & Gas sector on the European index (DJSI Europe). Repsol has won recognition for its energy efficiency and carbon management for the third time in the last five years according to Climate Disclosure Leadership Index (CDLI). Other acknowledgements: 37

38 SUMMARY

39 Positioned for growth Diversification Upstream as growth engine Focus on exploration Delivery based on projects in development phase Balancing our capital employed: More OECD/non-OECD. More Oil vs Gas Profitability Sound financial position Maximize return on investment Operational excellence Fully invested assets in Downstream Self-financed strategic plan, resilient to stress scenarios Commitment to maintain investment grade Competitive dividend pay-out 39

40 Strategic Plan Investor s Update June 2014