Investor Update 2017 2016 - 2020 Value & Resilience - Repsol
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Investor Update 2017
2016 – 2020 Value & Resilience
©
Disclaimer ALL RIGHTS ARE RESERVED © REPSOL, S.A. 2017 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 Royal Legislative Decree 4/2015 of the 23rd of October approving the recast text of the law on the securities market 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. This document mentions resources which do not constitute proved reserves and will be recognized as such when they comply with the formal conditions required by the system “SPE/WPC/AAPG/SPEE Petroleum Resources Management System” (SPE-PRMS) (SPE – Society of Pretroleum Engineers). 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 and with any other supervisory authority of those markets where the securities issued by Repsol and/or its affiliates are listed. This document mentions resources which do not constitut e proved reserves and will be recognized as such when they comply with the formal conditions required by the system “SPE/WPC/AAPG/SPEE Petroleum Resources Management System” (SPE-PRMS) (SPE – Society of Pretroleum Engineers). 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. In October 2015, the European Securities Markets Authority (ESMA) published the Guidelines on Alternative Performance Measures (APM), of mandatory application for the regulated information to be published from 3 July 2016. Information and disclosures related to APM used on the present document are included in Appendix I “Alternative Performance Measures” of the Management Report for the full year 2016. ©. 2
2016-2020
Value & Resilience
1. Company overview and strategy
2. Upstream
3. Downstream
4. Gas Natural Fenosa
5. Financing
6. 2017 Outlook
3
3
Company overview
and strategy 1
4
4
Key messages 9M 2017
Company overview and strategy
Continued delivery on strategic objectives
Bn€ ~6.5 ~6.5 (X) 1.1 ~1.1
4.8
Strong EBITDA CCS generation Net Debt/EBITDA in line with projections
(1)
Upstream Downstream
Kboe/d 685-690 USD/Bbl 6.8
~680 6.4
688
Production volumes in line with guidance Refining margin indicator in line with
expectations
2017 Budget 9M17 actual 2017 guidance
(1) Refinining Margin Indicator 5
Key messages Q3 2017
Company overview and strategy
Upstream
Production: Exploration program:
Q3 17 = 693Kboe/d 3% increase YoY 3 exploratory wells completed (1 positive)
Libya ~25 Kboe/d in the quarter As of 30th Sept. 8 exploratory and 1 appraisal in progress
Startup of Juniper (T&T), ramp up of Flyndre and MonArb in 2017 program: 17 wells (15 exploratory & 2 appraisal)
the UK and Lapa and Sapinhoa in Brazil
Downstream
Refining: Petrochemicals:
Strong perfomance EBIT ~180M€ in line with record
Refining margin indicator 7.0 USD/Bbl in Q3 17 levels in early 2016
Planned maintainance for the year completed in 1H17: Marketing:
Higher volumes and margins in Service Stations
3Q17 Utilization of the distillation units = 99%
FCF:
3Q17 Utilization of the conversion units = 104% Generation above 2 Bn€
Corporate and others
Synergies and efficiencies: Corporation:
2017 target €2.1 Bn Q3 17 Net debt €6,972 Mn€
(1)
Accelerated delivery of 2018 target Net Debt / EBITDA (x) = 1.1
Capex: Objective Credit rating BBB stable
~3 Bn€ without impacting production volumes
(1) Estimated FY 2017 6
Through the value chain and across the globe
Company overview and strategy
Upstream main Both
projects
Our shareholders
Core businesses:
Upstream and
Downstream
~700 kboepd ~1 Million bpd refining
production capacity
~2.4 billion boe
20% stake in GNF
proved reserves (*)
(*) As at 31/12/2016 7
2016 - A year of strategic progress
Company overview and strategy
Group FCF breakeven Divestments
$/Bbl ~50 • 10% stake in GNF € 1.9 Bn
~42
̴ 60 • Piped LPG € 0.7 Bn
Target ~40
̴ 43 • Tangguh € 0.3 Bn
• TSP € 0.1 Bn
• Others (eg: LPG Ecuador and Peru) € 0.6 Bn
TOTAL CASH RECEIVED € 3.6 Bn
Net Debt Key Metrics
€Bn 2015 2016
14.00
€11.9 Bn EBITDA CCS (Bn€) 5.1 5.0
11.00
Brent price ($/Bbl) 52.4 43.7
€8.1 Bn
8.00
€ 3.8 Bn HH ($/MBtu)
Refining margin
2.7 2.5
5.00
Indicator($/Bbl) 8.5 6.3
2.00 Exchange rate ($/€) 1.11 1.11
2015 1Q16 2Q16 3Q16 4Q16 8
2016 to 2020: Value and Resilience
Company overview and strategy
Challenge: a volatile, uncertain and complex environment
Strategic Plan 2016-2020 Long term value capture
Portfolio
Value • Keep financial and operating
Management
discipline: synergies and efficiencies
• Shift from growth to value
• Capex flexibility delivery • Consolidate and extract the current
• Portfolio rationalization • Competitive and sustainable value of our assets
shareholder remuneration
• Manage portfolio to capture maximum
value
Efficiency Resilience
• Review of projects with a long-term
• Integrated model pay back
• Synergies and • Self-financing strategy even
company-wide in a stress scenario • Be ready to diversify/adapt traditional
Efficiency Program • FCF breakeven reduction businesses
Transformation Program
9
Delivery on commitments
Company overview and strategy
COMMITMENT 2016&2017 DELIVERY
0.3B€ impact in 2018 In 2016 0.3B€ already achieved
Synergies
New target of 0.4B€
Efficiencies (Opex & Capex)
IMPLEMENTATION
0.8B€ in 2016; 1.8B€ in 2018 2016: 1,3B€; 2017 1.8B€
Capex flexibility ̴3.9 B€ average per annum 2016: 3.2B€; 2017 3.0B€
3.1B€ by 2017 (*)
Portfolio Management Already divested 5.1 B€
6.2B€ by 2020
(**)
Reduce FCF Breakeven $40 /Bbl Brent ~$42/Bbl Brent targeting $40/Bbl
Financial strength Maintain investment grade BBB stable rating achieved
Ahead of plan On target
(*) It includes cash proceeds and benefits (**) Organinc breakeven (divestments not included) 10Efficiencies and Synergies Update
Company overview and strategy
Pre-tax cash savings
COMMITMENT DELIVERY ESTIMATED
// 2016 BUDGET // // 2016 // // 2017 //
Synergies €0.2 B €0.3 B €0.3 B
Upstream Opex &
Capex efficiency €0.6 B €0.8 B €1.2 B
Downstream
profit improvement €0.2 B €0.3 B €0.4 B
and efficiency
Corporation right-
sizing
€0.1 B €0.2 B €0.2 B
€1.1 B €1.6 B €2.1 B
2018 target accelerated into 2017
11Resilience in the lower part of the cycle
Company overview and strategy
2015 2016
Upstream 2015 2016 2015 2016
Brent price ($/Bbl) 52.4 43.7 Refining margin
Break (*)
Even($/Bbl)
̴ 94 ̴ 61 Indicator ($/Bbl) 8.5 6.3
HH ($/MBtu) 2.7 2.5
EBITDA CCS (Billion €) 5.1
5.0
2016 • Upstream: Lower cash
3.8
2015 breakeven.
3.2
• Downstream: Strong
2.1 integrated margin.
1.6
• Group FCF breakeven
after dividend and
> -0.3 -0.2 interest reduced to
$42/Bbl.
Corporate &
Upstream Downstream
Others Repsol
12
(*) Includes Talisman Energy Inc. figures since 8th of May 2015. Excludes any 2015 Upstream disposal.Portfolio management
Company overview and strategy
Completed
10 % Stake GNF Piped LPG Alaska dilution
Eagle Ford-Gudrun 10 % Stake CLH UK wind power
LPG Peru & Ecuador Exploratory licences Canada Brynhild Norway
….Latest transactions
Tangguh Ogan Komering
TSP
TOTAL DIVESTED 5.1 B€13Self-financed SP 2016-2020 - 40% net cash delivered
Company overview and strategy
Cash movements 2016-2020 (*) Sensitivities 5 years accumulated
2016 3.8 -0.3 3.6 -3.2 4.0 Adj. Net
Contribution Bn€ FCF Income
1.5 1.3
Bn€ Brent +/- $5/bbl
~6 ~21
-1.5 -1.3
~29 ~4
Adj. Net
Bn€ FCF Income
0.8 0.6
HH +/- $0.5/MBtu
-0.8 -0.6
~10
Adj. Net
Bn€ FCF Income
Refining marging 0.8 1.1
+/- $1/bbl
-0.9 -1.1
Cash for
Operating cash Financial
Divestments Investments dividend and
flow post tax expenses
debt
(*) Stress price scenario considered: Brent ($/Bbl) 2016: 40; 2017: 40; 2018: 50; 2019: 50; 2020: 50; HH ($/MBtu) 2016: 2.6; 2017:2.6; 2018-2019-2020:3.5
Note 1: This figure does not consider non-cash debt movements such as exchange rate effect and other effects 14UPSTREAM 2
153 core regions in the portfolio
Upstream
North America: Growth
Production 2016: ~182 kboepd
Operatorship: ~79%
SouthEast Asia: FCF & Growth
Gas production (2016): 71% Production 2016: ~98 kboepd
• Unconventional portfolio Operatorship: ~37%
• Operatorship Gas production (2016): 77%
• Valuable midstream positions • Self-financed growth
• Relationship with governments/NOCs
Latin America: FCF • High potential exploration blocks
Production 2016: ~302 kboepd
Operatorship: ~20%
Gas production (2016): 70%
• Regional scale
• Exploration track record
• Cultural fit
2016 2017E
(*)
NOTE: Europe, Africa & Brazil:
Production (Kboepd) 690 685-690
Production 2016 ~ 108 kboepd
1P Reserves (Mboe) 2,382
(**) (***)
(*) Post disposals of ̴17 Kboepd from TSP and Tangguh in 2016 RRR (%) 124 ̴100
(**) Organic (***) Long term average 162016 Upstream Results
Upstream
RESERVES PRODUCTION (**)
kboepd
690
800 +23%
2015 700
2014 2016
600
+57% 559
1P Reserves (Mboe) 1,539 2,373 2,382 500
400 355
300
(*) 200
RRR (%) 118 159 124 100
0
2014 2015 2016
(*) Organic RRR (**) It includes Talisman since the 8th of May of 2015
(***)
EBITDA PROJECTS
M€
+29%
2,500
2,072 • Ramp-up Cardón IV (Venezuela)
2,000
1,611
1,500
• Ramp-up of Sapinhoá (Brazil)
1,000 • First oil of Lapa (Brazil)
500
0
• Production restarted in Libya
2015 1Q16 2Q16 3Q16 2016
(***) Cumulative 17Assets & Projects
Upstream
// Exploration //
AMERICA
GoM Contingent resources
NORTH
Duvernay Marcellus Eagle Ford
/Midcontinent
(Canada) (USA) (USA) (USA)
• Unconventional North America
WI: ~31% in basin
WI: 100% WI: ~89% and 37% in JV WI: 28%/~11% • Brazil: Campos-33, Sagitario
• Russia: Karabashky
• Colombia: CPO9 & Niscota
• Alaska: Colville High
AMERICA
Kinteroni + Akacias
LATIN
M. -Huacaya Carabobo – AEP Cardon IV • GOM: Leon and Buckskin
Sagari (Colombia)
(Bolivia) (Venezuela) (Venezuela)
(Peru) • Indonesia: Sakakemang
WI: 45%
• Vietnam: Red Emperor extension
WI: 37.5% WI: 11% WI: 50% WI: 53.8%
• Kurdistan
• PNG: GAP
Europe, Africa
MonArb / Prospective resources
& Brazil
El-Sharara Reggane Flyndre Cawdor
Sapinhoa Lapa
(Libya) (Algeria) (UK) • Brazil: Santos Basin & Espirito Santo
WI: 15% WI: 15% NC115-WI: 20% WI: 29,25%
WI: 30% • Colombia: RC11, RC12 & Tayrona
NC186-WI:16% Redevelopment • Unconventional North America
• GOM
• Peru
SOUTHEAST
• Guyana
PM3,Kinabalu C. & J. Merang Red Emperor
ASIA
(Vietnam)
• Angola
(Malaysia) (Indonesia)
• Romania
WI:35% PM3 WI: 36% C / WI: 46.8% • Portugal
WI: 60% K 25% JM
• Norway
• Indonesia
• Malaysia
• Vietnam
“As is” organic portfolio potential of more than 900 kboepd • PNG
• Bulgaria
First production 2017 Ramping up in 2017
18Capex optimization
Upstream
Organic RRR (%)
Average 2017-2020
118% 159% 124% ̴100%
Bn$
8
7
6
5
4
3
2
1
0
2014 2015 2016 2017 2018-2020
Exploration Capex Development Capex Average Capex 2018-2020
19Efficiency program: delivering our target
Upstream
~400
M€
~1,200 2017
Original
~350 Target
850 M€
2016 ~50
Original
Target (*)
~800
550 M€
2016 Savings already New Savings 2017 Savings
achieved in to be Target
2016 impacting achieved in (accelerated
in 2017 2017 from 2018)
Note: Excluding synergies
* It does not include ~ 200 M€ of one off 203 Downstream
21Sustainable cash flow generator
DOWNSTREAM
Downstream
Refining Petrochemicals
̴1 million barrels of CORUÑA All three sites are
refining capacity per BILBAO managed as a single
day. petrochemical hub
TARRAGONA
Top quartile position among Chemical sites and crackers
European peers along the cycle. strategically located to supply
Southern Europe and
La Pampilla
63 % FCC equivalent. Mediterranean markets.
PUERTOLLANO
Logistic flexibility to enhance
5 refineries optimized as a single CARTAGENA Peru
competitive feedstock imports at
operation system.
Tarragona and Sines.
Oil pipeline Repsol Oil pipelines CLH
Marketing LPG Trading and G&P
4,715 service stations One of the leading retail distributors of G&P: transportation,
throughout Spain, Portugal, Peru, LPG in the world, ranking first in Spain marketing, trading and
and Italy. and is of the leading companies in regasification of liquefied
Portugal. natural gas.
3,501 service stations in Spain → 70% have a
strong link to the company and 29% directly We distribute LPG in bottles, in bulk and
managed . Trading & Transport: trading and supply of
AutoGas.
crude oil and products
Objective to generate FCF ̴ €1.7B per annum (average 2016-2020)
222016 Downstream Results
Downstream
European Integrated Margin of R&M EBITDA CCS (*)
Industry peer group Repsol position
M€
($/Bbl)
12
4,000 3,788 3,173
10 3,400
8
6 2,800
4
2 2,200
0
-2 1,600
-4
-6 1,000
-8
2014 2015 1Q16 2Q16 3Q16 2016 400
Source: Company filings. 2015 1Q16 2Q16 3Q16 4Q16
Peers : Repsol, Cepsa, Eni, Galp, OMV, MOL, Total, PKN Orlen, Hellenic Petroleum, Saras and Neste Oil * Cumulative
FCF Integrated Model
Operating Cash
Flow €2.2Bn • Top quartile position among European
Divestments €1.2Bn peers.
Capex -€0.7Bn • Fully-invested assets
Free Cash Flow €2.7Bn
232016-2020 Downstream strategy
Downstream
Maximizing value and cash generation leveraged on fully invested assets
European Integrated Margin of R&M Average investments
Industry peer group maximum margin
Repsol position
Industry peer group minimum margin
Downstream resilience reinforced by the integration of commercial and
industrial businesses
Note: Integrated R&M margin calculated as CCS/LIFO-Adjusted operating profit from the R&M segment divided by the total volume of crude processed (excludes
petrochemicals business) of a 10-member peer group.
Based on annual reports and Repsol’s estimates. Source: Company filings.
Peer group :Repsol, Cepsa, Eni, Galp, OMV, MOL, Total, PKN Orlen, Hellenic Petroleum, Saras and Neste Oil.
24Repsol’s refining margin indicator
Downstream
$/Bbl 8
6.3 6.4
6 0.4 0.7
0.7
3.2 3.0
3.0
4
2.7
2
2.7 2.7
0
2016 Refining Margin Indicator Estimated Refining Margin
Indicator 2017-2020
Base Repsol Crack Index Additional margin from projects pre-SP Efficiency and margin improvement program
25Gas Natural
4 Fenosa
26Gas Natural Fenosa
Rationale
10% stake sold 20% remaining stake
Liquid investment provides
€1.9Bn proceeds
financial optionality
Executed with no discount to
market price at 19€/share
8.6% above GNF’s unaffected
Strong profitability
performance through
dividend stream
market price of €17.5/share 1
7.8x EV/EBITDA 2016E Strategic stake in a leading
gas & power company
above comparable trading
multiples
Window into role of gas and
renewables in energy mix
27
(1) 6 months volume weighted average share priceFINANCING 5
Financial Strategic Plan 2016-2020
Financing
Sound track record
Resilient Plan with stronger Conservative
in managing adverse
business profile financial policy
conditions
Commitment to reduce debt and maintain investment grade
The three Rating Agencies, Standard & Poor’s, Moody’s and Fitch have upgraded
and confirmed the rating BBB stable , Baa2 stable and BBB stable respectively.
Commitment to maintain shareholder compensation
in line with current company level
29Net Debt Evolution
Financing
€Bn
12 3.2 0.5
10
8
(3.8) (3.6)
6 11.9
Breakeven at $42 per barrel
4 8.1
2
0
Net Debt 31st Operating Cash Capex Dividends Paid Divestments Net Debt 31st
Dec 2015 Flow & Others Dec 2016
Targeting FCF Breakeven at $40/Bbl
30Strong liquidity position
Financing
(Billion €) (Billion €)
14
12.2
14.0
12
12.0
Term deposits w/ 10 9.8
immed.availab. ** 9.2 1.9 x
10.0
7.7
7.9
Operating 8
committed 0.2 8.0
Credit Lines
0.4 0.2
6.0
Structural 6 2.3 6.0 2.7
committed
Credit Lines
4.2
4.0
4
4.8 4.1
Cash & 2.1 2.0
4.8
Equivalents 2
2.1 2.1 2.4 0.0
1.7 1.9
1.3
0.6
Liquidity as of Short term debt
0 September 2017 September 2017 *
Liquidity as of 2017 * 2018 * 2019 2020 2021 2022 >2023
September 2017
Liquidity covers Liquidity exceeds 1.9x
long term debt maturities beyond mid 2020. short term maturities
(*) Short term debt excludes interest and derivatives € 0.16 billion.
(**) Deposits classified as financial investment in the accounting although they have an immediate availability.
31Sources of liquidity as of 30th Sep 2017
Financing
63%
(Million €)
14.0
Cash and Equivalents 4,830
12.0
Total Unused Committed Credit Lines 2,698
10.0
Term deposits w/ immediate availability (1) 200
Total Liquidity Available 8.0
7,728 0.2
Long term Short term 6.0 2.7 12.2
(Million €) Structural Operating TOTAL 4.0 7.7
Committed Credit Lines 2,327 396 2,723
2.0 4.8
85% 15% 100%
Used 0 (25) (25)
0.0
Cash and Undrawn Credit Term deposits w/ Liquidity 3Q2017 Gross debt
Available 2,327 370 2,698 equivalents Lines immed.availab. * 30 Sept 2017 **
86% 14% 100%
Available Structural credit lines
Strong liquidity position represents
represent 86% from total committed
63% gross debt
credit lines
(*) Deposits classified as financial investment in the accounting although they have an immediate availability.
(**) Gross debt excludes interests and derivatives € 0.16 million
32Delivery of Commitments
Financing
• Piped Gas Business, Offshore Wind, TSP, Tangguh
Divestments
• E&P portfolio management: Alaska, Norway
GNF monetization • Sale of 10% participation in GNF
• Repsol dividend reduction
Dividend
• Scrip dividend
Synergies and
Efficiencies
• Efficiencies and synergies accelerated
Debt reduction and • Net Debt/EBITDA of 1.1x
maintenance of IG • Rated BBB stable by the three rating agencies
Maintenance of investment grade is fundamental to our long term strategy
33Industry
Context
2017 OUTLOOK
6
34Outlook for 2017
2017 Outlook
Our assumptions
(*)
2017B 9M17 2017B 9M17
Brent price ($/Bbl) 55.0 51.8 Refining Margin ($/Bbl) 6.4 6.8
HH ($/MBtu) 3.2 3.2 Exchange rate ($/€) 1.05 1.11
Guidance
(***)
2017B 9M17 2017E 2017B 9M17
Production (KBoepd) ̴ 680 688 685-690 (**)
FCF BE ($/Bbl) ̴ 40 ̴ 40
Capex (Bn€) 3.2-3.6 1.8 ̴ 3.0
ND/EBITDA (x) 1.1 1.1
Synergies and 2.1 ̴ 1.8 2.1
Efficiencies (Bn€)
(*) Budget (**) Long term objective (***) Estimated 35Investor Update 2017
2016 – 2020 Value & Resilience
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