There's still life for Repsol after the loss of YPF unit

Leading Spanish oil company Repsol reported its net income in the first three months of the year was up 12.4 percent at 643 million euros, excluding its Argentinean unit YPF, which was nationalized last month by the government of President Cristina Fernández de Kirchner.

Including the contribution from YPF, earnings were up 3.5 percent at 765 million euros. Repsol attributed the improvement to higher crude and gas prices, which were up 15.5 and 12.1 percent respectively, the return to normalcy in its business in Libya and better figures from its liquefied natural gas division.

Gross operating profit in the form of EBITDA excluding YPF climbed 10.5 percent to 1.926 billion euros. YPF accounts for about a fifth of Repsol's earnings.

Repsol's net debt, excluding YPF and Gas Natural Fenosa, in which it has a 30-percent stake, stood at 4.17 billion euros, down from 4.84 billion a year earlier.

The figures beat analyst forecasts and this was reflected in Repsol's share price, which climbed 8.23 percent to 14.21 euros, making it one of the best performing stocks in the blue-chip Ibex 35 on the day. Repsol has lost over 40 percent of its market value this year.

"This is a solid set of results," Bloomberg quoted Peter Hutton, an analyst at RBC Capital markets in London, as saying. "It should also be a reminder that the heavily negative sentiment overhanging the stock looks overdone."

Argentina seized control of 51 percent of YPF last month. Repsol still retains a 6.4-percent stake in the company. The Spanish company is looking for compensation for its lost stake of about 8 billion euros.

At a presentation to analysts, financial director Miguel Martínez estimated Repsol's maximum exposure to YPF at 5.7 billion euros. That includes 4.1 billion for the value of YPF on Repsol's books and a loan of 1.6 billion euros granted to the Petersen group to acquire a 25-percent stake in YPF.

Martínez said the seizure of the stake in YPF is "manifestly illegal and discriminatory," adding that the Fernández government's argument that it was in the "public interest" cannot be justified.

Repsol plans to take the case to World Bank's International Center for Settlement of Investment Disputes.

Martínez insisted that a clause in the agreement with the Petersens obliging Repsol to buy back the stake at the sale price in the event of it losing control of YPF did not apply as this was a development over which the company had no control.

The director said Repsol has "alternatives to strengthen its earnings" and enjoys a "solid financial and liquidity position." He pointed to Repsol's businesses in Brazil, Alaska and Cuba and plans to explore 20 more wells this year.

Repsol will present a new business plan for the period through to 2016 on May 29.