REPSOL: 3Q’20 TRADING STATEMENT (ANÁLISIS BANCO SABADELL)
3Q’20 trading statement with negative refining margin (US$ -0.10/barrel). BUYIn 3Q’20 REP shows a -4% drop in production, but what has caught our attention is the negative refining margin (despite standing at US$ 1-2 in October). We believe that with the stock trading at lows (vs. +24% recovery for the sector and +57% for crude oil prices), we should not see negative reactions. Assuming that 3Q’20 Net Profit will come in at € -36 M (vs. € -258 M in Q2 and € 447 M in Q1), we expect € 336 M of Net Profit in Q4 (vs. € 251 M consensus), which is attainable with the current crude price, and refining margins improving slightly vs. 3Q’20. Even if this were not to occur, and despite the fact that we are more pessimistic in NFD than the consensus (€ 4.86 Bn vs. € 4.52 Bn consensus), we do not expect any cuts to DPS’20 (15% yield) that REP conditions to NFD performance (not Net Profit). The driver for the stock will be the reactivation of demand: the market is overly penalising the current environment, pricing in a drop of more than -60% in recurring volumes, with no recovery in the long term.
Repsol is an oil and gas company. Co. is engaged in all the activities relating to the oil and gas industry, including exploration, development and production of crude oil and natural gas, transportation of oil products, liquefied petroleum gas (LPG) and natural gas, refining, the production of a wide range of oil products and the retailing of oil products, oil derivatives, petrochemicals, LPG and natural gas, as well as the generation, transportation, distribution and supply of electricity. Co. operates in more than 40 countries. Co.'s operations are divided into four segments: Upstream, Downstream, LNG and Gas Natural Fenosa.
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