Repsol Increases Shareholder Returns With Higher Q2 Cash Flow Thanks to Strong Refining Margins

Repsol’s second-quarter adjusted earnings increased to EUR 2.1 billion from adjusted earnings of EUR 488 million a year ago largely on higher oil and gas prices and stronger refining margins. Operating cash flow doubled to EUR 1.8 billion from EUR 902 million the year before while capital spending grew to EUR 859 million from EUR 560 million. However, management revised upward capital spending guidance to EUR 3.8 billion-EUR 4.0 billion from EUR 3.8 billion previously, EUR 1 billion higher than 2021. Repsol maintained its plans to distribute 25%-30% of organic operating cash flow, which should lead to higher shareholder returns if conditions maintain or improve. It already increased the dividend this year and repurchased 75 million shares. It also announced an increase to its repurchase plan from 50 million to 75 million shares. Net debt including leases fell further to EUR 5.0 billion from EUR 5.9 billion at the end of the first quarter, implying a net debt/capital ratio of 16.6%, in line with peers. Our fair value estimate and moat rating are unchanged.