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Investing.com -- Repsol (BME:REP) shares fell by 1.9% on Tuesday after Morgan Stanley (NYSE:MS) described the Spanish energy group’s first-quarter 2025 trading update as “negative,” pointing to weaker-than-expected refining performance as the main drag on results.
While the Madrid-based firm’s refining margin indicator for the quarter was broadly in line with market consensus at $5.3 per barrel, earnings were hit by lower premium margins and reduced utilisation rates.
Morgan Stanley flagged these issues as central to the weaker outlook, estimating net income (pre-minorities) of around €625 million — roughly 18% below the consensus forecast of €763 million.
Refining EBIT was impacted by planned maintenance, which led to distillation utilisation dropping to 83.4% and conversion utilisation to 91.2%, both down from the previous quarter.
Repsol also reported a lower premium over benchmark refining margins due to weaker biofuel margins, quality issues with Maya crude from Mexico (with a potential €40 million impact), and reduced volumes of Venezuelan crude.
April-to-date refining margins have remained under pressure, averaging around $3.0 per barrel before a partial recovery to approximately $4.0.
In the upstream segment, the integrated energy company produced 540,000 barrels of oil equivalent per day, down 2% quarter-on-quarter.
Higher output in Libya and from the Marcellus shale was offset by asset disposals in Colombia and Trinidad and Tobago, as well as maintenance in the UK and Norway.
The stronger Libyan contribution is expected to push the segment’s effective tax rate to around 50%.
Other areas of Repsol’s operations showed more stability. The group said marketing EBIT was flat year-on-year, with seasonal improvements in LPG and retail energy, while mobility softened.
Its renewables segment also saw flat performance compared to the prior year. Meanwhile, the chemical division remained weak, and wholesale, gas, and oil trading were broadly steady.
On the cash flow side, the Spanish oil major spent about €550 million on dividends and €85 million on share buybacks.
A €200 million payment was also made for a stake in Bunge’s biofuels business, partly offset by €300 million in proceeds from the sale of Colombian upstream assets.
Morgan Stanley expects the weak refining performance and a challenging macro backdrop — including softer oil prices and lower margins — to prompt earnings downgrades in the coming weeks.