CEPSA reported clean CCS net income of €199.9 million in H1-2013, down 20% YoY

Madrid, 06-8-2013 — /EuropaWire/ — Domestic Business Activities and a Drop in Crude Oil Sales Hinder the Group’s Earnings.

• Earnings from international business operations account for 63% of the Group’s Net Income
• Weak consumer demand, tight marketing margins and a challenging environment for refining activities all hampered the Company’s domestic businesses
• Capital expenditures in the first half of 2013 amounted to €465 million
• As a key development in the period, CEPSA was awarded two exploration blocks in offshore Brazil

Clean CCS net income for the first six months of 2013 (calculating changes in inventory values at replacement cost and factoring out non-recurring items) totaled €199.9 million, falling  20% (-€50.3 million) year-on-year.

Underlying the decline in earnings were the following factors:

• Lower production and sales of crude oil, compounded by a 6% drop in the price of benchmark Brent (Upstream).
• Depressed refining margins and a sluggish domestic market for motor fuels, which fell 6% (Downstream).
• New energy price regulations accounted for the decrease in Gas & Power and the Group’s consolidated earnings in general, as compared to the same period last year.

Applying International Financial Reporting Standards (IFRS) which use the weighted average cost method of accounting for valuing inventory, net income in the first two quarters of 2013 stood at €124.1 million, a decrease of 62% (-€204.6 million) from last year, with -€154.3 million attributable to price fluctuations in crude and refined product inventories and non-recurring items.

Out of total CCS net income in the period, earnings from business activities abroad, mainly in E&P, Petrochemicals and fuel exports, accounted for 63% whereas the remaining, 37%, was derived from domestic business activities.

Capital expenditures in the first half of 2013 amounted to €465 million, rising €60 million from the previous year. Net debt stood at €1,473 million, with a net debt-to-equity ratio of 19%.

Regarding safety performance indicators and reflecting its efforts to make safety a priority goal, CEPSA recorded all-time lows in its lost-time injury frequency rate, coming to roughly 2.5 (accidents per million hours worked).

Breakdown of CCS Net Income and Key Developments by Business Segments:

Exploration & Production

Net income in the upstream segment totaled €84.4 million at the end of the second quarter of 2013, down 28% (€33.5 million) year-on-year.

The combination of a drop in benchmark Brent crude oil prices (-6%), a weaker US dollar against the euro and the decline in sales, mainly in Colombia, all led to lower E&P earnings.

In June, CEPSA expanded its exploration acreage in Algeria, adding to its activities in the region. In May, the Company announced that it was awarded two offshore blocks in Brazil, marking a further step in its strategy of broadening its upstream operations and diversifying its asset portfolio.

Refining & Marketing

Downstream net income at June 30, 2013 amounted to €43.8 million (€41.9 million in Marketing and €1.9 million in Refining), falling 39% from the €51.9 million posted in the first half of 2012 (€64.9 million in Marketing and -€13 million in Refining).

Excess refining capacity in Europe, subdued global refining margins, feeble consumer demand for oil products – primarily gasoline and diesel fuels – in Spain and downward pressure on marketing margins as a result of fierce competition on traditional markets all hindered earnings in this business area.

Petrochemicals

Net income for the first two quarters of the year stood at €60 million, in line with the figure recorded a year earlier.

Chemical sales volumes slipped 4% mainly due to tepid demand in the Eurozone, which was partially offset by a jump in sales in other foreign markets.

CEPSA continued to make headway on the construction of the Phenol/Acetone plant in Shanghai, China, representing the Company’s first-time investment in Asia. The facility is schedule to come on-stream in the third quarter of 2014.

Gas & Power

Net income from Gas & Power businesses in the first half of 2013 came to €11.7 million, declining 32% (€5.6 million) year-on-year.

New energy price regulations which became effective in the year, scheduled maintenance shutdowns and turnarounds in the Company’s refineries and chemical plants in the first quarter and low electricity pool prices in the first half of 2013 all had a negative impact on cogeneration and combined cycle power plants, with production falling 33% from the previous year.

In June, the CEPSA Group completed the acquisition of 15% of Endesa’s and Iberdrola’s shareholdings in the MEDGAZ consortium, raising its total stake to 35%.

CEPSA – Communication and Institutional Relations Division
relaciones.institucionales@cepsa.com
Tel: (34) 91 337 62 02
www.cepsa.com

###

In June, CEPSA expanded its exploration acreage in Algeria, adding to its activities in the region. In May, the Company announced that it was awarded two offshore blocks in Brazil, marking a further step in its strategy of broadening its upstream operations and diversifying its asset portfolio