Earnings call transcript: Repsol Q2 2025 reports strong cash flow growth

Repsol S.A. presented its Q2 2025 earnings, showing notable improvements in financial metrics, particularly in cash flow and net debt reduction. The company reported an adjusted income of €272 million, marking an 8% increase from the previous quarter. Cash flow from operations surged to €1.7 billion, a 50% jump from Q1, while net debt decreased by 2% to €5.7 billion. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value calculations, with the company maintaining a "GOOD" overall financial health score. The stock price rose by 1.9% to €13.43, reflecting investor confidence and trading near its 52-week high of €15.71.

Key Takeaways

• Adjusted income increased by 8% from Q1.
• Cash flow from operations improved by 50%.
• Net debt reduced by 2% to €5.7 billion.
• Stock price increased by 1.9% post-earnings.
• Strong performance in renewable energy initiatives.

Company Performance

Repsol’s Q2 performance demonstrated resilience and strategic growth, especially in its cash flow and reduction of net debt. The company’s focus on expanding its renewable energy portfolio and hydrogen strategy appears to be paying off. Upstream production rose by 3% to 557,000 barrels per day, and refining utilization increased significantly in July, indicating operational efficiency.

Financial Highlights

• Revenue: Not specified in the earnings call.
• Adjusted Income: €272 million, up 8% from Q1.
• Cash Flow from Operations: €1.7 billion, a 50% increase from Q1.
• Net Debt: €5.7 billion, a 2% reduction from March.
• Gearing (including leases): 17.9%.

Outlook & Guidance

Repsol maintains a positive outlook for 2025, projecting cash flow from operations to reach €6 billion. The company plans a net capital expenditure of €3.5 billion and aims for shareholder remuneration to constitute 30-35% of cash flow from operations. InvestingPro data shows strong momentum, with a 21.2% price return over the past six months and a moderate beta of 0.77, suggesting lower volatility than the market. Repsol is also planning share buybacks worth €700 million and targets an upstream production of 590,000 barrels per day by 2026.

Want deeper insights? Access Repsol’s comprehensive Pro Research Report, available exclusively on InvestingPro, along with 8 additional ProTips and over 30 financial metrics not covered in this article.

Executive Commentary

José Ángel Fernández, CEO, emphasized the importance of cash flow, stating, "Free cash flow is the king." He also highlighted the company’s growth in the renewable power sector, saying, "We are growing and scaling up in our renewable power business." Fernández expressed confidence in meeting strategic objectives for 2025.

Risks and Challenges

• Fluctuating oil and gas prices could impact revenue.
• Regulatory changes in the energy sector may affect operations.
• Economic downturns could reduce energy demand.
• Competition in renewable energy markets is intensifying.
• Potential geopolitical tensions could disrupt supply chains.

Q&A

Analysts inquired about Repsol’s strategy in the US gas markets and its approach to portfolio optimization. The company reiterated its commitment to exploring hydrogen and renewable energy opportunities and is preparing for a potential liquidity event in its upstream business by 2026.

Full transcript - Repsol SA (REP) Q2 2025:

José Ángel Fernández, CEO or Senior Executive, Repsol: The emerging environment remains solid, consolidating the recovery trend initiated in the second half of twenty twenty four. In Iberia, activity in our key industrial facilities was negatively impacted by the power outage that affects the entire peninsula in April, reducing utilization rates and preventing us from capturing the positive refining momentum. Against this broader context, Repsol delivered a solid set of results driven by the recovery of upstream volumes and the continued robustness of its commercial businesses, highlighting once again the resilience of our business model. Second quarter adjusted income was $7.00 €2,000,000 8% above the first quarter of the year. Cash flow from operations amounted to €1,700,000,000 a 50% improvement compared to the first quarter, benefiting by a €600,000,000 working capital inflow, mostly related to inventories and optimization measures.

The accumulated operating cash flow until June was €2,900,000,000 25% higher than in the same period a year ago. That includes a settlement with Sinopec with a neutral contribution from working capital movements in the first half of the year. CapEx amounted to €1,300,000,000 in the quarter and €2,700,000,000 in the first six months. Regarding our divestment target, out of the €2,000,000,000 objective for 2025, we have announced disposals and asset rotation for a total of EUR 1,200,000,000.0, of which EUR 500,000,000.0 were cash in the first semester. Net CapEx stood at EUR 1,200,000,000.0 in the quarter and €2,200,000,000 accumulated until June.

If we had cash in all the divestments announced this year, net CapEx until June will stand at €1,500,000,000 Net debt closed at €5,700,000,000 a 2% reduction compared to March. Gearing, including leases, was 17.9% by quarter end. Looking ahead, we remain on track to deliver on our main strategic objectives for 2025 according to the priorities defined at the beginning of the year. If back in April, we discussed the possibility of an exit scenario for the rest of the year, the evolution of the main indicators has brought us back to our base case. Regarding our shareholder remuneration objectives, we will distribute 30% to 35 of the cash flow from operations generated in 2025 through a combination of cash dividends and share buybacks.

We have increased the funds dedicated to dividends by 3% as committed in our strategic plan. In July, we paid the second dividend of the year for a total EPS of

Pablo, Investor Relations, Repsol: EUR0.975,

José Ángel Fernández, CEO or Senior Executive, Repsol: equivalent to an 8.3% increase compared to 2024 after factoring for the lower number of shares after the capital reductions executed last year. For 2026, our AGM held in May approved to distribute our first dividend of EUR 0.5 to be paid next January. 2025 dividend in cash will be complemented by share buybacks for the equivalent of EUR 700,000,000 to reduce capital. Yesterday, we announced our first capital reduction through the redemption of 29,000,000 shares acquired by an equivalent amount of EUR $350,000,000. A second capital reduction of shares to be acquired for the equivalent of another €350,000,000 will be executed before year end.

For this purpose, euros 300,000,000 will be acquired through a new share buy back program to be launched in coming daysweeks and the remainder EUR 50,000,000 through the settlement of existing derivatives. Looking at the evolution of the main macroeconomic indicators over the last quarter. Brent averaged $88 sorry, 68 per barrel, 10% lower compared to the first quarter and 20% below the same quarter last year. The oil price experienced significant volatility fluctuating within a $20 range over the course of the period. The Henry Hub averaged $3.4 per million Btu, 8% lower quarter over quarter, but significantly, I mean, 9% above the same period in 2024, with market consensus pointing to a rise of U.

S. Gas price, I mean, towards the end of the year. In refining, Repsol’s margin indicator averaged $5.9 11% higher than in the previous quarter, primarily driven by stronger gasoline spreads. After declining to around $4 in April, the indicator recovered in May and June supported by solid demand, low inventories, capacity closures and delays in some of the new projects coming on stream. Finally, the dollar weakened significantly against the euro to an average of $1.13 in the quarter, And this trend has continued in July with the eurodollar trading in the $1.16 $1.17 range.

Turning to the highlights of the Upstream division, our focus remains firmly on value generation and portfolio optimization supported by the upcoming startup of new strategic projects. Second quarter adjusted income was €439,000,000 4% below the previous quarter and 3% higher than in the same period last year. Year over year, the higher gas realization prices, lower production costs and lower taxes were partially compensated by lower oil prices, lower volumes and the depreciation of the door. Production averaged 557,000 barrels per day, a 3% increase over the first quarter, thanks to the higher contribution in UK, Trinidad And Tobago, Eagle Ford and Libya that compensated the impact of divestments and natural decline. Eurail’s production has stayed at second quarter levels, putting year to date average at around 550,000 barrels per day at the higher end of our full year guidance.

In Indonesia, as part of our objective to concentrate operations in countries where we have facilities to grow competitive advantages, we reached an agreement to divest our 24% stake in Corvidor for $425,000,000 This non operated position contributed around 17,000 barrels per day to our production in the first half of twenty twenty five. In Trinidad And Tobago, the Cypr and Minto projects reached first gas in April and May respectively, expecting an average 28,000 barrels per day barrels equivalent, I mean, contribution over the twenty twenty six, twenty twenty eight period. In The UK, the closing of the agreement with New Energy is expected in coming days before probably the end of this month after receiving the approval from the NSTA. The resulting joint venture will become one of the largest independent producers in The UK continental shelf with up to a production of 130,000 barrels per day in 2025, of which 68% is oil. Post closing Repsol UK production, so from the end of this month on, will increase to around 59,000 barrels equivalent per day, which compares to a production of around 30,000 barrels a day in the 2025 in this legacy position.

In unconventionals, we’ve resumed drilling activity in the Marcellus with one operated rig from April to June. In response to the better gas price outlook, we are preparing the campaign for 2026 expecting to have one rig in Marcellus and one rig in Eagle Ford. And around 55% of our 2025 and 2026 North American gas volumes are covered through a zero cost collar between $3 and $5.5 to $6 per million Btu. In The Gulf, the development of Leonca still is reaching its final stages with the start of production planned for this third quarter. In Alaska, the development of the first phase of PICA progresses towards an early start up between December 2025 and January 2026.

We expect full ramp up of production during 2026, reaching a gross capacity of 80,000 barrels per day within the year. Finally, in Venezuela on the May 27, the United States administration revoked the oil license of several international companies, including Repsol. Cardone four continues producing gas and the management of Petrobras Quiri Quire operation has been returned to Pedevesa. In Industrial, second quarter adjusted income was EUR 99,000,000, EUR 189,000,000 below the same quarter in 2024, mainly due to the lower results in refining, chemicals and trading, partially compensated by a higher contribution of Peru on wholesale and gas trading. Let me underline this point.

The quarter was defined by the consequences of the power blackout that affected the Iberian Peninsula on the April 28. Due to a network stability, a blackout disconnected all generation facilities in Spain and Portugal from the grid. This led to the shutdown of all our refineries and petrochemical plants, which had to be restart progressively. Our teams acted swiftly to restore operations and ensure continuity in supply. In refining this blackout, the outage along with the electricity supply disruptions in Cartagena and Puertollano had an estimated impact of around EUR 130,000,000 at EBIT level.

All these challenges coincide with planned maintenance across several sites. And as a result, utilization of distillation capacity declined to 74% while conversion units reached 86% of nameplate capacity. The current refining margin or the actual refining margin over the period was better said $0.3 below the indicator, reflecting a negative premium due to the issues that affected our operations. Excluding the impact of the blackout and subsequent incidents, the margin premium would have reached $2.1 positive in the quarter. Activity in our refining complexes has normalized in the third quarter.

The margin indicator has averaged $9.6 in this quarter, in July, for an average of $6.1 year to date, benefiting from very healthy product spreads, in particular diesel cracks. The utilization of distillation has reached 93%, 94% this month and conversion units have run-in July at 102%. In addition, margins for renewable diesel have reached levels above $900 per ton as supportive policy developments have stimulated demand and domestic production. Going to the chemical business, Repsol’s margin indicator increased by 76% over the first quarter, driven by cheaper naphtha and LPG feedstocks. However, this better margin again, this better margin environment couldn’t be captured due to the lower utilizations and soft demand.

The blackout had a negative impact of around €45,000,000 The operating result, we have to take into account that we are talking about three petrochemical complexes, Tarragona, Porto Llano and Xines in Portugal. Without the impact of the outage, the business would have reached breakeven in EBIT terms. The total estimated impact of the incidents that occur in our industrial business in the Iberian Peninsula during the second quarter amounts to approximately EUR175 million. And the company is currently assessing legal actions and awaiting the official determination of responsibilities related to the power outage to the blackout. Finally, in wholesale and gas trading, we have received five LNG cargoes from Carcassie De Pass after the plant start commercial operations in April ahead of date assumed in our budget.

And this factor increases in total number of gas cargoes to be lifted by Repsol in 2025 from seven to 11, contributing an additional €100,000,000 to the operating result over the whole year. Moving to customer. This division continues to demonstrate a sustained track record of solid quarterly results built around our competitive multi energy offering recently enhanced by a new identity and brand evolution. Second quarter adjusted income was €198,000,000 a 25% increase over the same period in 2024, thanks to a higher contribution in all the business segments. The accumulated EBITDA until June was €700,000,000 putting us on track to meet the 1,400,000,000.0 Remember that, that was the target originally set for 2027 and is going to be captured as early as in 2025, so this year, anticipating two years, the target we have in our strategic plan.

In mobility, sales of road transportation fuels grew by 16% year over year, mostly due to the anti fraud measures and control mechanisms adopted in Spain. The solid evolution of sales now in pre pandemic levels challenges projections that anticipated a significant destruction of demand. The number of service stations offering 100% renewable fuels reached more than 11 sorry, 1,200 as of the June. And we expect to reach 1,500 by the end of the year. In Spain, 53% of our network already offers multi energy solutions.

The number of digital clients, including wireless users, reached 10,100,000, a 17% increase over the same period in 2024. Finally, in power and gas retail, last quarter, we add 142,000 new net customers, reaching 2,800,000 clients by the June, consolidating Repsol as the fourth largest operator in the Spanish electricity market. In low carbon generation, the adjusted income was €7,000,000 EUR 6,000,000,000 higher than a year ago, thanks to the higher result in combined cycles and in renewable generation. The average pool price in Spain was EUR 39 per megawatt hour, five higher than in the same quarter last year due to our lower share of renewables in the generation mix. The power generated by Repsol reached 2.8 terawatts hour, 58% higher year over year.

The execution last quarter of our first asset rotation in The U. S. Confirmed the strength and appeal of our portfolio for leading investors. We agreed to divest a 56% stake in a seven seventy seven megawatt portfolio for $340,000,000 including the Frye Solar project in Texas and the Jicarilla Solar And Storage Complex in New Mexico. The portfolio was valued at $795,000,000 including $60,000,000 in tax equity proceeds.

Finally, we reached an agreement to settle the litigation process with Hecate Under the terms of the settlement, Repsol will divest its 40% stake in the company, resulting in a negative impact of around €100,000,000 registered against second quarter results under special items. Looking ahead, our growth in The U. S. Will be driven by the platform acquired through ConnectGen, mainly focused on onshore wind. Now regarding our updated outlook through the end of twenty twenty five, the guidance for the year remains broadly unchanged.

Under a $70 Brent, 4.6 refining margin indicator scenario, we expect to generate around €6,000,000,000 of cash flow from operations after factoring the impact of the Iberian blackout. Investment will remain concentrated on the efficient development of our growth projects in the Upstream, the transformation of our industrial assets and let me say, optimization of them, growing our power and gas retail business, enhancing the multi energy offering to our clients and expanding our low carbon generation portfolio. In renewable fuels, the construction in Puertollano of our second advanced biofuels plant in Spain progresses toward starting up in the first quarter of twenty twenty six. Net CapEx is estimated for the year 2025 at around EUR 3,500,000,000.0 subject to the timing of the divestment processes and the execution, but that is the target and the guidance we have now with the better or the best information we have in our hands. In renewables, we are currently working on two new asset rotation expected to be closed before year end.

One is in Spain for a 700 megawatt wind and solar portfolio and the other involves the outpost project in Texas. As discussed before, we maintain our shareholder remuneration commitment for the year. The dividends paid in cash together with share buybacks for the equivalent of €700,000,000 will put total distributions of 30% to 35% of the cash flow from operations at the higher end of our strategic range. To conclude, despite the material impact of the blackout affecting the Iberian Peninsula, Repsol delivered a resilient performance in the first half of twenty twenty five, supported by the recovery of our upstream volumes in the second quarter and the continued strength of the commercial business. We remain confident on delivering our strategic objectives for 2025, growing value for our shareholders in a sustainable way, firmly committed to a profitable transformation and the achievement of our decarbonization goals.

The strength of our business model built on a sound financial position and our disciplined capital allocation approach position us well to manage the uncertainties of the current volatile environment. In Industrial, following the normalization of operations in July, we expect to capture in coming quarters the ongoing positive momentum of the refining business. In the Upstream, the completion of Leon Casteel and Alaska will enhance future cash flow generation and enable us to normalize CapEx levels from 2026 onward after the significant investments made in 2024 and the first half of twenty twenty five. In addition, our exposure to North America could benefit from the relative strength of the Henry Hub, driven by new LNG infrastructure, increasing demand and the potential deregulation of The U. S.

Energy sector. With this, I will turn it over to Pablo as we move on to the Q and A session. Thank you very much.

Pablo, Investor Relations, Repsol: Thank you, Joseon. Before opening the Q and A, I would like to ask participants to limit yourself to a maximum of two questions. If time permits, we will try to cover more in a second round. Of course, the IR team will be happy to assist for any follow ups afterwards. As usual, I would like the operator to remind us of the process to ask a question.

Please go ahead, operator.

Operator: Thank you.

Pablo, Investor Relations, Repsol: Thank you, operator. Let’s get started. Our first question comes from Michele della Vigna at Goldman Sachs.

Michele della Vigna, Analyst, Goldman Sachs: Thank you very much and congratulations on the strong results. Two questions if I may. The first one is on U. S. Gas, the outlook for 2026 looks really good possibly the best in a decade.

I’m just wondering what would lead you to put more capital there and maybe take on one or two more rigs and increase production into the 2026 timeframe? And then secondly, I was wondering on your U. S. Renewables portfolio with the changes to the IRA, it looks like there is a big benefit in starting construction early and still getting the full incentives there. Does that mean that effectively CapEx there needs to be brought forward, especially towards 2026 and 2027?

Thank you very much.

José Ángel Fernández, CEO or Senior Executive, Repsol: Going to your first question, you are right For this reason, I mean, you know our point of view, we try to maximize cash. And knowing the experience of the sector in The U. S, that sometimes when main prices are okay, some additional CapEx efforts, they could have also some impact in the unconventional in the local level in terms of inflation and so on. So we have to combine both views. And because we have this prudent view, I mean, are increasing our investment approach, our investment effort in the unconventional, mainly for gas production.

For that reason, we are going to have one rig in the Marcellus and another one that is going to put in operation at the end of the year in the Eagle Ford. And at the same time, as I mentioned before, we are covering at the moment, we have covered with through this quarter, yes, 55% of our production for coming two years, 2026, 2027. And that is positive in terms of guaranteeing, let me say, some breakeven for this operation. But again, we are following in a very close and accurate way what is happening in the market. We are creating positions.

We are increasing our effort, but always under the principle of maximizing the cash of the operation. Free cash flow, let me say, is the king and has to be the king in the unconventional. And I think that unfortunately and let me say, I’m not blaming some others because sometimes, I mean, the last years, we also we’ve made these mistakes on that, probably maximizing the concept of net present value and investing hard in these unconventional assets. And sometimes not maximizing the cash concept now, I mean, I think that we are quite close to have a right balance in this effort. Going to your second question, I think that one of the large advantage we have is that the IRA changes in the American Congress at the end of the road were quite reasonable.

I mean, it was I think that’s quite right balance in terms of the decision that the American legislators, they took or they did. And in this sense, I mean, have five gigawatts of our pipeline that are, let me say, secure to benefit from the tax framework that is supported either through ITCs or PTCs in the framework of the IRA. So we were quite comfortable, and let me say, quite happy seeing the result of the American Congress that is supporting the growth we have for coming years in the American renewables arena. And that is important because what we are seeing in the market is that the appetite for this renewable power is growing, demand is growing in The U. S, The appetite for PPAs is also growing.

Prices of PPAs are growing. Everything related to AI and data center on top of more industrial activity in some places like Texas, also the increase of operations in the area is increasing the energy needs. And today, I mean, in practical terms, the only source able to cover this demand growth in the American economy is renewable energy because, you know, the bottleneck, the crunch that they have in terms of providing some other facilities like CCGTs and so on because the difficulties that providers of these capital goods they have to increase their production and to put in operation these facilities in coming two, three, four years. So I think that there is a good momentum in the American market for debt. There is a clear policy from the administration in The U.

S. Is very supportive about producing all kind of energies for covering the American demand that is positive. And we are there in The U. S. Offering all kind of energies, oil, gas and power.

And we think that under the regulation that was approved by the American Congress and that we see in a positive way, we have the supportive framework to maintain our bet to go on investing in The U. S. Thank you.

Pablo, Investor Relations, Repsol: Thank you very much, Michele. Our next questions come from Alister Scheim at Citi.

Alister Scheim, Analyst, Citi: Hello?

Pablo, Investor Relations, Repsol: Hello, Alistair.

Viraj Borghataria, Analyst, RBC: Sorry. Hello, Alistair. Guess my line was up. Hello. Just one question actually.

Just and John, you also have made huge progress in the transformation of the upstream business. So congratulations on that. What more do you think you have to do to prepare the business for the twenty twenty six liquidity event? And has there been any evolution in your thinking of what that liquidity event now might look like? Thank you.

José Ángel Fernández, CEO or Senior Executive, Repsol: So Alistair, you know, because we have asking to your questions, we have talked sometimes about debt. I believe in the end of the road, so in the liquidity event, so we are preparing the company to be fully prepared by the end of the 2026 to be prepared for debt. But I also am a believer in the journey, as you mentioned in some, let me say, implicit way in your question. Because what we are doing in the way is improving the quality of barrels, disposing and divesting from areas where the capacity we could have to create value is more limited, investing hard as we are doing in areas where cash flow from operations per barrel growth in projects is more evident and at the same time, increasing the quality in terms of cash flow of the barrels we produce. I think that, I mean, when you are in a journey like that, you are investing hard, the fruits, they arrive later, but now we are in a moment where things are starting to be more balanced.

I mean, this summer we will start producing the Leon Castile asset. From the end of this month on, We will have a new picture in The UK with more borrowers, more cash flow from operations coming from The UK, better quality of borrowers. Alaska is going to be happen in the way we announced in the framework of a strategic plan. So we are closer in terms of having, let me say, a good approach of the liquidity event, not only because we are, let me say, preparing all the control mechanism of the company adapted to the American market, not only because we are advancing in terms of preparing the reporting and so on, we are preparing the company for all debt, but also because we have an upstream business that could be better understood by an American investor. On top of that, of course, we are analyzing alternatives.

I mean, you know that when we are talking about liquidity events that is a very broad concept. It could be a direct IPO that probably is not our favorite option, but it’s there. We could talk about the possibility to have a reverse takeover process with an American listed company or it could be, let me say, a private investor entering in our business to go on in this transformation pathway. I mean we are there. We are not in a hurry to do that.

We are in the meantime, in the midst we are improving the business. So that means that things could be easier if we go on improving this business. We are fully aligned in this approach with our partner, EIG, and that is the way to prepare the company. Thank you, Alistair.

Viraj Borghataria, Analyst, RBC: Thank you very much.

Pablo, Investor Relations, Repsol: Thank you very much, Alistair. Our next question comes from Viras Borghataria at RBC.

Alister Scheim, Analyst, Citi: Hi, thanks for taking my question. Two please. The first one is just on PETA. There were some contradicting comments on the start up timing, and I think it was related to a weather window or a review on the weather window. Can you just confirm when you expect that to start up?

And any thoughts on the ramp up, whether it’s late twenty twenty five or mid twenty twenty six? And then the second question is just on the gross CapEx as we’re thinking about this year and into next year. You’ve got a number of projects in the upstream that are rolling off, some kind of M and A activity as well. And then, I guess, any comments on the carbon? I’m just trying to get a sense of what we should expect for growth CapEx in 2026.

Thank you.

José Ángel Fernández, CEO or Senior Executive, Repsol: Thank you, Biraj. I mean, going to pick up first, we have a full alignment in terms of the operational approach, in terms of dialogue with our Santos partner, that is the operator. So don’t in case of doubt, I mean, I underline that Santos has always the last word on the approach because I mean, they are good operators in the area. I had the opportunity even in physical terms last month to visit our offices in San Jose operating the asset in Alaska. It was at the June.

At that time, we still have and they have some kind of concerns related to the level of the Mackenzie River that you know that it was needed to transport all of some parts of the modules from the area of Alberta towards the North Slope by the river. I mean, in case of not having the adequate levels, the alternative was more complex through the Canadian Western Coast, delaying three months the project. So I think today, I mean, that is not, let me say, rocket science, but I think that we are in the mainstream scenario and the mainstream scenario could be, I mean, start up something in between the December and January. I mean, in those weeks, I mean, of course, there are in a period that is complex like that, you could always have some days, let me say, of delays and so on. But I mean, for me, the mainstream scenario is that in the call of the full year results in February, I mean, were probably be talking that Alaska is producing oil.

So that’s going through the ramp up. It’s the best approach in a direct way, I mean, in terms of connecting. We will start producing in gross terms 25,000, 27,000 barrels a day And probably towards in summer twenty twenty six, we will be close to the 80,000 barrels a day of production. We have and there is a plan to go on connecting wells to sustain, to maintain this production. And what is more important, probably it’s too early to talk about that, but I mean, there are plenty of resources in the area to be developed.

And there is a PICA too that I mean, of course, we are not going to enter in developing the full engineering or thinking about the FIDs of PICA two before and knowing in accurate way how the wells are performing in PICA one and so on. There are more areas and the perception I have is that Alaska is going to push hard in positive terms in the process of transforming the E and P of Repsol. Going to the gross CapEx, the better figures we could have today is that in 2026, the E and P business is going to reduce in a figure equivalent to €500,000,000 a year, the CapEx effort because I mean, due to the projects coming on stream in 2025, La Palaonca still I’m taking into account that probably because this ramp up, because these new connections of wells and so on, Pica is going to require some CapEx support in 2026. But I see that the best approach we could have today is a reduction of €500,000,000 of the gross CapEx in this business in the CapEx, sorry, in this business in 2026. Going to the net CapEx of the company, remember when we presented the strategic plan in February in 2024, the range for the net CapEx was something between EUR 16,000,000,000 to EUR 19,000,000,000.

I mean, today, my best estimation is that we are going to be in the strategic plan period in the range EUR 16,000,000,000, 17,000,000,000. That is going to be the range we are going to be there. If you take into account that combining the figures of last year with the figures of this year in net CapEx terms with indication of €3,500,000,000 I mentioned before, we will be at around $9200000000.09300000000.0 euros of net CapEx combining 2024, twenty twenty five. I mean, you could approach the figure of €7,000,000,000 of net CapEx, roughly speaking, for the period twenty twenty six, twenty twenty seven. So all in all, the today estimation is a net CapEx of EUR16 billion to EUR17 billion for the period.

What is behind this figure? I mean, there is, as I mentioned in the last call, some confirmation that we are going to delay a bit and reduce the intensity of investment in terms of hydrogen megawatts in our refineries to a figure that is going to be important, that is going to be close to 600, 700 megawatts by 2030 combining electrolyzers and 200, two fifty coming from biogas that is going to be transforming the reformers of our refineries. On top of that, you know that we also reduced the default in the renewable fuel site outside the Iberian Peninsula, concentrated our efforts in Spain and Portugal. And you know that we also I mean, the most accurate figure in terms of gigawatts in operation by 2027 was also reduced. That is behind this reduction of net CapEx and the best estimation we have is 16,000,000,000 to €17,000,000,000 for the period of twenty four-twenty twenty seven.

Thank you, Viraj.

Pablo, Investor Relations, Repsol: Thank you very much, Biraj. Our next question comes from Alejandro Vithil at Banco Santander.

Alejandro Vithil, Analyst, Banco Santander: Yes. Hello. Thank you for taking my questions. The first question is about the very strong performance of the customers’ business. If you can give us an indication what should we expect in the future after almost delivering the ’27 target this year and the underlying drivers of this very, very strong performance?

And the second reason is about the European diesel market. Do you think about what’s driving this very strong momentum and if you think could continue during the coming months? Thank you.

José Ángel Fernández, CEO or Senior Executive, Repsol: Gracias, Alejandro Buenos Dias. I mean, let me start with I mean, I thought I had those days. You know the Spanish flight space operator, NIE, published last year a figure showing that in 2024 in Spain was a record year and for the aviation sector. I mean, they control or manage 2,350,000 flight operations in Spain in 2024. When you analyze the figures of this organism, Eyle, at the June, we are overcoming in five point nine percent the record of 2024.

That means that I mean, we are experiencing in this part of Europe, in Spain and Portugal, I mean, an extraordinary growth of services, tourism and so Spain is going to receive 100,000,000 tourists this year, only overcame by France in global terms in terms of number of visitors and by The U. S. I mean, as a second country, Spain, in terms of revenues. So that means that for instance, the jet middle distillates consumption is growing. That is supporting our operation.

When you analyze and you see our roads, the activity related to services, tourism, economy, the changes in economy after the pandemic with more online sales, that means more trucks, more banks. I mean, all that is explaining, let me say, in the fundamentals, what is happening in Spain and in Portugal and in the fuel business. So on top of that, if you analyze our sales comparing with 2024, the growth has been at around 16% year comparing year to year in terms of volumes. I mean, that is not only economic activity, it’s also related to the anti fraud measures. I mean, the figures over the last two, three years were highly contaminated by this illegal activity.

And let me say that, of course, that is not fully over, but the Spanish authorities are fully committed to cope with this problem and they are taking real measures to combat to attack this fraud. On top of that, you have I mean, gasoline market in Europe is booming, it’s okay, margins are okay. Diesel, because Amid al Distel is because they mentioned the reasons I mentioned before Alejandro, they are also okay. On top of that, we are supported by these 24,000,000 customers we have in the Iberian Peninsula. We are entering in a successful way in new businesses.

For instance, the power and gas retail business. We are approaching the figure of 3,000,000 customers. This year, we are going to achieve 3,000,000 customers in this business. That is, let me say, a material figure and with a positive a high EBITDA, positive free cash flow. So we are growing, making cash for the company.

The non oil business and you are a Spanish person, you could visit our service station, you could see that more and more this premium approach in terms of position in the market of Repsol has improved a lot over these years. So all that is explaining in fundamental terms the results. Of course, we could see, as always in business, ups and downs in coming quarters, but there are fundamental reasons for that. So no doubt that taking into account that, we will decrease the targets of our customer business for coming years because we have to go on growing and improving. Remember that I mean, the figure I have in mind, probably I’m wrong, but in 2016, this business had an EBITDA of around EUR $750,000,000 a year.

Roughly speaking, on the perception of the market was that this business was declining. So this year, we are going to have EUR 1,400,000,000.0 in terms of EBITDA and growing. So let me say that it’s a hidden business because we always talk about all brand, hurry up, refining margin, and it’s okay because they are drivers of our business. But we have some kind of hidden beauty here in Repsol that is growing and has already an EBITDA of EUR 14,000,000,000. Thank you, Alejandro.

Gracias.

Henry Patricot, Analyst, UBS: Thank you.

José Ángel Fernández, CEO or Senior Executive, Repsol: Yes. And let me say, going to that, yes, sir, what is happening also in Europe, excuse me, because I was fully excited, let me joke, talking about what is happening in the Spanish market. But I mean, as I mentioned before, there is a fundamental in terms of consumption in the market. On top of that, you have low inventories in Europe. You have the new maritime regulation coming from IMO from the ECA zones impacting in the Mediterranean as it’s shifting volume from fuel oil to diesel.

So it’s increasing demand. And on top of that, you also have the momentum in the market in terms of fleet cost and so on that is giving a more competitive position to European producers for the European market, reducing the competitiveness of some other areas of the world, I don’t know, India, Middle East and so on. And my perception Alejandra is also that all this sound around sanctions on Russia is also starting to be discounted to impact European diesel market and probably is going to have a higher effect in coming months. Thank you. Gracias.

Pablo, Investor Relations, Repsol: Thank you, Alejandro. Our next question comes from Irene Himona from Bernstein.

Irene Himona, Analyst, Bernstein: Congratulations on the quarter. My first question is on trading within the Industrial Division. It remains very strong. It certainly increased sequentially. It’s the second largest contributor to divisional EBITDA.

Some of your peers have mentioned reducing trading positions due to unpredictable geopolitical volatility. I wanted to ask if you can talk a little bit around your trading strategies in this period of, let’s say, enhanced uncertainty? And then second the second question, on your 2026 planned E and P listing, Can you please give us a sense of the percent interest, which you expect Repsol will retain in the listed entity, please? Thank you.

José Ángel Fernández, CEO or Senior Executive, Repsol: Thank you, Irene. I mean, in a structural terms, our trading is growing. Why it’s growing? Because you know, because you are following and you have follow ups all over these last years. And you know that at the very beginning, trading was the supplier of our refining business, not more.

And more and more, this business start to work, taking some other positions, working with the biofuels and these new fields enter in providing, let me say, service to the E and P business of Repsol, taking volumes, taking global positions in Singapore, Houston and Europe and so on. So there is a natural growth in this trading. And let me also include in some way the cash trading in this equation because you know that because the loan positions we have mainly in the Gulf Of Mexico in America in terms of LNG, Caucasier, Sabine Pass, Cameron and so on. We are increasing our exposure. We have a strong short positions in the Iberian Peninsula.

And this business is also growing. All in all, our EBITDA is going to be close to I mean, last year and this year to the around the figure I have in mind is around EUR 1,000,000,000 close to EUR 1,000,000,000. I mean, saying that, we have a very limited appetite in our liquids trading business. That means that if I mean, we try to avoid volatility. If we, let me say, took positions in a part of the world and we have supply a different quality in other parts of the world.

We try to be or to reduce to zero our exposure to main figures like Brent, like getting our markers of this product. And we try to go to the delta in terms of qualities of products, in terms of geographies, in terms of playing with the time that could be in some way opening an arbitrage opportunity for our trading business. So we have a very risk limited trading activity. And because this approach we have, I think that this uncertain period is not closing any opportunity to the trading activities we have in our hands. So for that reason, we could expect a trading activity that could be in some way similar to some other periods.

And I said before, with that asset base that is growing. Going to the plans for the Upstream listing, I mean, a clear approach we have is that we want to retain a minimum of 51% in this Upstream business and maintaining the control of the company that are today the framework or that is better said, the framework we have in this liquidity event approach we have. Thank you, Irene. Thank you.

Pablo, Investor Relations, Repsol: Thank you very much, Irene. Our next question comes from Pedro Alves from Caixabank.

Pedro Alves, Analyst, Caixabank: Hi, good afternoon. Thank you for taking my questions. The first one on the asset rotations plan for the remaining of the year. I think you have assets to be sold in Spain and U. S.

As you explained. So perhaps you can give us some outlook on how do you see the asset rotation market, not only from the projects you have already launched to be sold, but also the looking ahead for the remaining years? Because we have seen some more cautious comments from some of the utility names, but also other players where they try to sell assets and particularly in U. S. So can you give us some comfort here or at least what’s your confidence in keeping these asset rotation plans in renewables for the remaining years to keep your total net CapEx as you said in the 16 to $17,000,000,000 over the plan and therefore keep sustaining your distributions to shareholders?

And the second question is on refining margins. If you can give us an update on the latest levels that you are seeing, particularly in this month of July? And given the current balances in Europe, what’s your outlook for the remainder of the driving season? Thank you.

José Ángel Fernández, CEO or Senior Executive, Repsol: I mean, going to your first question well, going to the cash in. Yesterday, we had the cash in coming from Frey and Hikariya. So but as I mentioned before, that was announced in the second quarter, but the cash in arrived yesterday. So that is going to be in the third quarter. Going to the projects that are now on track, I’m going to start theoretically by the most difficult part of the equation that is The U.

S. Because you’ll perfectly know, Pedro, the interest rates in The U. S. That are making things more difficult than they were two, three years ago. So good news is that we are in the process of disposing the outpost project.

The talks are quite advanced for that. As I mentioned in the last call, the transaction of what we call Pecos, that was addition of FRAI and Jicarillas was not an easy game. The advantage of Outpost is that the PPA is better than the PPA we have in Outpost sorry, in freight. And in freight was lower because it was our first project was developed after the pandemic in a period where the PPAs were lower and Outpost has a PPA higher than Fry and Pennington, that is the next one, is going to have a PPA significantly higher than Outpost. So things are improving the American market for that reason and because we are also in talks, we have the perception that things are going to go in the right direction in terms of the asset rotation of Outpost.

On top of that, because the fiscal framework of this project, we are going to have a cash in in this year with the asset rotation of Outpost that is going to be at around $200,000,000 as equivalent of ITC or the, let me say, the tax direct impact supporting the investment. So we expect to have the cash coming from the rotation of Outpost plus $200,000,000 coming from the fiscal support to this project. And things, I mean, are not ever easy, but I think that it’s going to be better than the expectation we have for freight that was closed on April 28. I mean, we closed that transaction, the blackout day. Going to Spain, I think that, again, the market is not easy, but is significantly better than the position the American market has.

We have had our last experience, Gallo, happened at the beginning of this year, 2025 was okay in terms of the multiples paid by the investor. You know that, I mean, the solar projects, they could have a bit more difficulties in Spain. Large advantage, the great advantage of this new basket of assets, 700 megawatts is that a figure close to 500 are wind. So you know that new wind projects in Spain are quite scarce resource. The great advantage of wind is that the production and the capacity to capture prices is more extended or more flat, not slightly flat, but I mean, without Baker distribution over the whole day.

So taking into account the structure of the Spanish pool price and wholesale market, the capacity to have returns is clear in this kind of project. So I mean, we’ll have to work in this direction, but today we are quite comfortable about the possibility to go on with these two rotation. Going to the refining margins, I mean, you know and let me say that it’s not important only to have high margins, but it’s also important to be producing because in the second quarter, the problem we have unfortunately because this outage, this blackout is that our capacity to produce was reduced. I mean, going to the most important thing, what is happening in operational terms. First, the program turnarounds of the refineries, most of them were done in the first half of the year.

We still have to maintain for some days the IsoMax unit in Tarragona this second half of the year. And we also have a turnaround in Cartagena that is going to impact one of the three distillation towers, some hydro exfiltration units and probably some days the hydrocracker because the supply because the spike could be a bit reduced because the maintenance are impacting in these units. But I mean, taking into account our whole system, the best new is that I mean, the system is going to be working a high level of installation over the year. If we go to the current figures, each quarter, as I mentioned before, we have a distillation utilization rate of 93% over the whole month and 102% the conversion unit. So we are capturing these margins.

And going to what is happening in this third quarter, the average as of today in our system is at 96 a barrel. So the forecast for the next months is initially for healthy refining margins. I mentioned some reasons for that, talking about demand, jet, gasoline, diesel, the potential impact of Russian sanctions and so on. Let me say that on the supply side, the new refining projects in Atlantic Basin continue to face delays in Dangote in Nigeria, Olmeca in Mexico. And on top of that, I mean, closures in Europe this year are taking place, vessel in Germany, Grangemouth in The UK, going to The U.

S, Houston. And I mean, additionally, there are some concerns in the market affecting the Lindsay refinery in The UK. So geopolitical tensions are also there that in some way from time to time, they could impact the middle distillates market. So for that reason, I mean, are good and we have a good perception of markets for coming months. Thank you, Ubrigado, Pedro.

Pedro Alves, Analyst, Caixabank: Thank you.

Pablo, Investor Relations, Repsol: Thank you very much, Pedro. Our next question comes from Henry Patricot at UBS.

Henry Patricot, Analyst, UBS: Yes, thank you for the update. Two questions, please. The first one, in Australian Industrial, but on the chemical side where we also saw quite a nice improvement in the indicator in the second quarter that you couldn’t capture that. So I wanted to check whether you continue to see these improvements in the third quarter and whether we could expect to see Mechanical’s EBITDA back into your positive territory in the second half? Then secondly, on the upstream side, there was a nice increase in production in the second quarter, Europe Africa.

And you mentioned Libya new wells there. Can you give us an update on what you see in terms of production potential in Libya? You previously talked about maybe some growth. So I just want to get an update on the developments in that country. Thank you.

José Ángel Fernández, CEO or Senior Executive, Repsol: JOSE Merci, Henri, going to your first question, I mean, I’m going to be clear about that. I mean, the crisis in the chemical business is not over. I mean, that is my first, let me say, highlight. It’s true that things are improving in the right direction. And as you said, and I mentioned before, without the outage effect, we will be in close to the breakeven in EBIT terms this quarter.

But there are still some fundamental concerns in this chemical business. I mean, flat demand is there, high energy cost in Europe. And what we are doing is I mean and the results of this quarter are a good example of that is now focusing on reducing costs, pushing breakevens down and increasing the margin through a higher differentiation We are implementing technical upgrades that are improving the competitiveness in our operations. We are, I mean, taking a lot of measures that I could explain, but I don’t want to bore you.

In terms of reducing the breakeven, these measures are going to have by the end of the year, combining all the effect over the year, an impact of €68,000,000 in terms of costs generally speaking. And what is important is that new margins are going to come next year. And new margins are going to come from Cines. Cines in the 2026 is going to add in an exit scenario, euros 80,000,000, 85,000,000 of new EBITDA in, let me say, average scenario, a figure of €130,000,000 €135,000,000 of EBITDA. That is positive.

On top of that, we are going to have next year also a high molecular weight polyethylene plant in Puertollano, focused on producing polyethylene for very specialized applications, defense and so on included, that, that is going to add new margins to the business. So we are not, let me say, waiting for a margins improvement. It’s true that margins are improving a bit, but that is not going to change dramatically from suddenly. And in the midst, we are reducing costs and we are improving margins. And I’m sure that quarter after quarter, this effect is going to be seen.

If we go to Libya, I mean, things again, I think that the country is improving in social, political, security terms, the position of the country year after year that is important. I think that, I mean, we have to underline effort that the country is doing, the effort that, I mean, for instance, in terms of security, we have seen over the last years that the Army of Libya led by Mr. Haftar has had a crucial role in combating terrorism in the country, in increasing the security in the country, improving the position and the stability of the country. So all that has a clear reflect on the ground. And going to the production, again, production in this quarter reached a maximum of 307,000 barrels a day.

When we took the Repsol stake of this production, we have been in 43,000 barrels a day net. That is the fruit of what happened last year in terms of increasing production with new wells. During this drilling campaign in progress in 2025, 12 wells new wells were restarted in the first quarter and in the second quarter. And we are going to see new wells connected in coming months. So all in all, the production is going to be increased in gross terms in 12,000 barrels a day that probably that could increase the Repsol production in 1.5, 2,000 barrels a day.

But we are growing more things in Libya. I mean, the exploration campaign in Libya start in December. We had the Nesser well that was a dry well. But now we are fully focused in our second well that has been spotted in June. And on top of that, we are increasing our bet in this country and a second rig has been contracted to fulfill the remaining exploration commitments, including potential early development in the Waha area.

So we rely on the country. We rely in the increase of security in the country. We are increasing our production there, and we are begging for future projects in Libya. Next year, Henri. Thank you. Thank you very much,

Pablo, Investor Relations, Repsol: Henri. Our next question comes from Lydia Redd for Barclays.

Operator: Thank you and good afternoon. Two questions, if I could. The first one, just on refining margins and the guidance, just as you’re doing, just given everything you said about the refining margins where they are at the moment, can you just ask why not take the guidance higher for those refining margins and just that impact on cash flow from operations? And I think probably a little bit linked to that, if we could talk about the buyback, obviously, share price has been incredibly strong this year. You’re one of the best performing European stocks.

Does that play into how you start to think about the buyback going forward as well? Thanks.

José Ángel Fernández, CEO or Senior Executive, Repsol: Thank you, Linda. I understand your point. But let me say that my a part of my duty is to be always present. And I prefer to stay there because, I mean, I you perfectly know that three months ago, we were in this I mean, you were in your your analyst in the micro, and I was in this room with my team. And we were talking about an exit scenario, the possibility to have $4 up barrel in terms of refining margin, a drop in the Brent prices and exit the scenario in terms of and we are taking I mean, taking advantage of that opportunity, we are increasing the efficiency of many of our businesses and so on because I mean, these kind of levers are positive to do this kind of cleaning in some way of more efficiency in our operations.

So but I can’t change in a dramatic way 180 degrees in three months. So I think that volatility is still there. The clouds in the world economy are not over. It’s true that we have a better expectation related to refining margins. The average as of today is $6.1 a barrel over the whole year.

So we are already above this guidance we have for the whole year. Probably taking into account what is happening now in the market, we are going to be in a higher refining margin than expected over the whole year. But I mean, the dollar euro exchange rate is there, a potential change in the global economy are there. So let me say, I have and that is crystal clear, a more positive approach that I had in April. I’m quite confident about the EUR 6,000,000,000 of guidance for the cash flow from operation of the year.

I don’t know if we are going to have potential upsides there. But taking into account all the volatility we are seeing in the market, I prefer to be prudent with you. And I’m sure that in case of seeing that what you are saying is true and probably could be, I mean, I’m not let me say, your point. I take your point. Probably you are right, but I prefer to wait a bit.

I’m sure that we’ll have the opportunity to talk about that in coming calls. Thank you, Lydia.

Pablo, Investor Relations, Repsol: Thank you very much, Lydia. And nowadays now our next question comes from Peter Lower, Redburn Atlantic.

Viraj Borghataria, Analyst, RBC: Hi, thanks. Just one question. You said in the presentation you expected to take your first hydrogen FIDs in the second half of the year. I was wondering if you could give some color as to what sort of returns you expect on those projects? And then perhaps more importantly, what’s the mechanism through which you make that return?

Is there some form of direct government subsidy? Or how does it work? Any color on that would be helpful. Thanks.

José Ángel Fernández, CEO or Senior Executive, Repsol: Thank you, Peter. So we are going to have probably in the third or fourth quarter two FIDs. One of them related to 100 megawatts an electrolyzer in Cartagena, 100% or sorry, 100 megawatts of installed capacity of electrolyzer in Petronor Bilbao. And in the first half of twenty twenty six, the third one in in Tarragona, probably one hundred one hundred fifty megawatts of of of electrolyzer. So with these three electrolyzers plus the biogas produced using, I mean, biomethane biogas and biomethane is the same, I this biogas reform in our refineries and producing hydrogen, we will be in this figure of 600 megawatts, roughly speaking, I mentioned before.

So what is this green hydrogen producing an electrolyzer competing in price with hydrogen we produce today using gas, mineral gas in our refineries, not at all. I mean, that is going to be more expensive. So the competitiveness of this hydrogen is not based in this competition with the green hydrogen. It’s based on regulation. And regulations said today that the 1% of the sales we have in the Spanish market or European market, but in this case, the Spanish market, by 02/1930, they have to contain 1% of renewable fuels with non biological origin.

And the most competitive way today at system in theoretical terms to produce this renewable fuel with non biological fuel is this hydrogen. So based on this, let me say market, not appetite, market needs to fulfill this regulatory mandate. We are seeing the economics, the returns of these electrolyzers evolve the 10% of return, so in a double digit. And that is, let me say, the pillar, the fundamentals of these economic returns. You also have to take into account, I mean, that is I mean, additional, more and more.

Yet for these three electrolyzers, we are going to have a strong support coming from European innovation funds in the case of Tarragon or by the subsidy approved to accelerate new technologies in terms of decarbonization by the Spanish Ecologic Translation Ministry. So these three electrolyzers, they have the support that in CapEx terms could be, roughly speaking, 1,300,000.0, 1,400,000.0 per megawatt of electrolyzer. I mean, all in all, that is going to support the economics of these projects. I mean, it’s not only subsidies, because let me say even I mean, subsidies are helping, of course, but the main driver is not subsidy. Because when you take I mean, I’m not going to enter too much time on that, but when we you take the electrolyte this hydrogen and the cost structure, 75% of the cost is OpEx in terms of energy, I mean power, 20% is CapEx and 5% are additional OpEx.

I mean, with many subsidies over the 20%, you can’t have a competitive installation if you don’t have something additional. And the main driver is the regulatory mandate that is supporting this return. Thank you, Peter.

Viraj Borghataria, Analyst, RBC: Thanks.

Pablo, Investor Relations, Repsol: Thank you very much, Peter. Our next question comes from Ignacio Domenico at GB Capital.

Pablo, Investor Relations, Repsol0: Hello, Joseon. Thank you for the presentation and for taking my questions. The first one is on the evolution of net debt. I wanted to get your view on particularly after the closing in the third quarter of the transaction in The U. K?

What are the moving parts there? And what’s your best guess we should end up 2025, okay, in terms of net debt? And my second question is related to or a follow-up on hydrogen. We are seeing other peers here in Spain that are also planning to move ahead with their FID in in hydrogen. So I I want to get your view on on on the deployment, no, of this technology in in Spain and in the medium or long term, if you think you could actually be exporting the molecule?

That’s my question. Thank you.

José Ángel Fernández, CEO or Senior Executive, Repsol: Gracias Ignacio. I’m sorry. So going to your question about net debt. What we are seeing in general terms is unstable net debt over the year. But as you mentioned, there is a perimeter change.

And this perimeter change is going to come because the integration of The UK. There is no change in terms of commitments in our balance sheet. But due to the specificity of this transaction, what we are going to see is that apart from the commitment that is already reflected in our balance sheet related to the commissioning commitments for the future is going to be, from now on, a financial commitment instead of other commissioning commitment. So the commitment is there, but being a financial commitment is going to be part of the net debt. This figure today, the best approach we have is that it’s going to be close to EUR 1,200,000,000.0, probably speaking, EUR 1.25, probably speaking.

So and that is going to be consequence of the change of the perimeter. So there is no any additional, let me say, financial commitment is there, let me say, rewriting in some way. We are changing in the balance sheet, the commissioning commitment by a financial commitment. On top of that, we also have to say that because this transaction, we are going to have a delta, an increase of EBITDA of $700,000,000 probably speaking, coming from The UK. We are going to have an increase in terms of free cash flow also coming from the in annual terms, I mean, because you know that the closing is going to be done next week.

So I’m talking in annual terms, we are going to have $740,000,000 new of EBITDA and we are going to have $320,000,000 of free cash flow. So that is going to be, let me say, the consequence in terms of perimeter of the financial commitments in one side, not increasing the debt, but changing the figure in the balance sheet. And on top of that, we are going to have a new EBITDA that is going to be higher than $700,000,000 and this free cash flow that probably is going to be higher than $320,000,000 in yearly terms. Going to your second question in Natlio, I mean, that’s it’s a base let me say, such subjective discussion and almost an academic discussion. I have my personal point of view on that.

But I’m not saying that I’m right. But when you have I mean, today in Spain, we have roughly speaking 600,000 tons a year of hydrogen consumption in the whole Spanish economy, mainly in the refining business plus fertilizers, a tiny part. And Repsol is consuming 360,000 tons a year of hydrogen today. So with these 600 megawatts, roughly speaking, I mean, we will be able to produce from our 360,000 tons a year, perhaps 80,000, 85,000 tons a year. So one fourth of the total consumption that Rexall has.

I mean, it seems to me, but that is common sense, that when you have a potential consumer in your own industrial plant, in your own country, I mean, probably the most efficient way to treat this hydrogen. Now, I’m not talking about the future, course, probably things are going to evolve. But today it’s

Pablo, Investor Relations, Repsol1: not

José Ángel Fernández, CEO or Senior Executive, Repsol: going to be for an upside. Perhaps some others, they have some other strategies and it could be nice. But in our case, exporting molecules is not probably our best business. I mean, because you could understand that if we have a consumption there, it will be easier and cheaper, decarbonizing what we have in industrial terms in Spain than exporting molecules, I don’t know, to Germany, for instance. That could happen in the future, of course, but our effort is going to be fully focused on that.

Gracias, Ignacio.

Pablo, Investor Relations, Repsol0: Thank

Pablo, Investor Relations, Repsol: you very much, Ignacio. Our next question comes from Matt Lofting at JPMorgan.

Viraj Borghataria, Analyst, RBC: Hi. Thanks all for the update. Appreciate it. Two quick ones, if I could. Some of my questions have been asked already.

I wanted to just firstly, if you could share how you see the business implications from here of the situation with Venezuela upstream, also the materiality of the impact on the refining margin premium through light heavies, boats, etcetera, as you look forward. I noticed Repsol referred to having taken the credit risk provision with the Q2 results. And then second, I just want to come back to full year cash flow guidance. I noticed that you mark to market not refining, but oil and Henry Hub, but we feel like the changes sort of somewhat offset there. So you just expand on the factors that caused you to move to the low end of the sort of the prior range in terms of the €6,000,000,000 How much of that perhaps related to the Iberian blackout during the second quarter and also maybe euro dollar remarks versus underlying factors?

Thanks.

José Ángel Fernández, CEO or Senior Executive, Repsol: So thank you, Matt. Going to your first question, I mean, Repsol always complies all and will comply with all laws and regulations, nature and international applicable to our operations in Venezuela. You know that we had the winding down process in May of our license, But we maintain our presence in Venezuela. At the same time, we are maintaining a very constructive and transparent dialogue with the U. S.

Administration in a very open way to ensure some kind of a stable framework for our activities. And that includes a viable mechanism for monetizing the production we maintain in Venezuela because we are producing gas there in Cardon. And we have, of course, the stake that is now, as I mentioned before, operated by Pedevesa of the JV in PetrovikiniKi. So and at the same time, of course, we maintain a very transparent dialogue also in the country because we are supplying cash for the domestic market. All in all, taking into account that now we are not monetizing this production, but we have an open way and an open hope to find some kind of framework in this open dialogue we have with American administration to monetize this production.

We prefer in accounting terms to be prudent. And for that reason, we have reduced the total exposure of Venezuela to three sixty million three seventy million probably speaking in our books. About the refining margin premium impact, negligible. I mean, because the situation we are seeing in the market now is that the supply of heavy oil is quite guaranteeing the Atlantic Basin. And because that reason, I mean, we have been able, as I mentioned before, with any cargo coming from Venezuela in the second quarter and decoupling the effect of the outage in Spain, have premium of $2.1 a barrel in our refining system.

So that is the best proof that there is no visible impact on our refining system. There is, of course, an impact in the upstream business. And the impact in the upstream business is that I mean, the cash flow from operations coming from Venezuela that we have last year is not going to be this year in or from, like I said, from June on in our accounts. But when I mentioned this EUR 6,000,000,000 of guidance, of course, I’m taking into account this figure. And for that reason, we have this credit risk provision in the second quarter of the year.

Going to the cash flow full year guidance, I mean, that in April, we had a different situation. In April March, April, we have a negative impact in terms of our guidance of the refining margin, crude oil and so on that were lower than expected. So the whole year is reflecting also this experience we had in March and April. On top of that, we have the power outage effect close to EUR 200,000,000.0. That of course is going to be and is included in the guidance for the whole year.

We have this working capital increase effect of Venezuela. You mentioned in your first question, is also included in this EUR 6,000,000,000 target for the whole year. There are, of course, potential upsides, yes. I mean, as I mentioned, and as Lydia was pointing out before, and I support in some way her approach. We could have an upside coming from the refining margin from the Harvey hub.

And for that reason, mean, all in all, we are quite comfortable with this 6,000,000,000 of cash flow from operations for the whole year. Thank you much.

Pablo, Investor Relations, Repsol: Thank you, Matt. Our next question comes from Fernando Bolid at Alantra.

Pablo, Investor Relations, Repsol1: Hello, Luciano and team. Thank you very much. Only one question. On renewables, I’ve seen prices have gone up double digit. Your electricity generation have also jumped, I don’t know, 50% plus.

Yet the EBITDA in the low carbon segment didn’t grow in the quarter. Don’t know if you could please elaborate on the drivers behind this. And more broadly, what EBITDA contribution should we expect from this business in the near term? I recall you previously had a target in mind. I don’t know if you have any target also for the next few years.

Thank you.

José Ángel Fernández, CEO or Senior Executive, Repsol: So thank you, Gracias, Fernando. I mean, are growing and we are scaling up in our renewable power business. And I think, let me say, probably the best good news coming from this business this year is going to be from the financial side. Probably the year, I’m targeting. I’m not committing this what I’m going to say now, but I’m targeting this objective.

And I think that we are going to be close to this target. This year, this business is going to be close to cash neutrality 2025. That is important. That means that this business is going and it’s growing and it’s going to be close to cash neutrality in 2025, combining cash flow from operations plus investments plus rotation. So I know that this figure is going to be probably favorized by the lag effect of some rotations coming from 2024 investments.

I know that. So what I’m saying is in some way tricky, let me use the term, but that is very clear and that is a clear trend. And probably this business with some strong growth is going to be self financed in two, three years in a recurrent way. So that is the first good financial news coming from the low carbon business. Going saying that, I mean, in 2025, we are going to have an EBITDA close to EUR 200,000,000 in 2025.

We have to take into account that by 2027, we are going to have an EBITDA above EUR 400,000,000 in this business. And probably what you are saying, and you are right, Fernando, is that in the second quarter, there are probably an effect that it could be something lower due to the fry the consolidation in the accounting of the company. So that could be I’m not sure about that. I’m going to check it. But probably, that could be the effect.

In any case, 200,000,000 in 2025, and we expect €400,000,000 in 2027. Thank you. Gracias, Fernando. Thank you.

Pablo, Investor Relations, Repsol: Thank you, Fernando. Our next question comes from Mateus Smith at Bank of America.

Henry Patricot, Analyst, UBS: Hi, thanks for taking my questions. And the first one was back to Neonxt, but thanks for all the detail that you ran through during the questions there. So my question on Neonxt was simply a clarification whether you’ve included the impact of that deal close, which is imminent within your full year guidance, such as the upgraded production outlook? So it was the first. And then the second, also sort of production related, but bigger picture thinking about 2026, very strong production in the first half, contribution of additional barrels from Neonxt startups of several projects.

How much higher could production run-in 2026 versus 2025, please?

José Ángel Fernández, CEO or Senior Executive, Repsol: Thank you. Thank you, Matt. I mean, your first question, the answer is yes. I mean, we are including UK in the full year guidance, of course, from now on or from August on. Going to your second question, I mean, are going to be something in between five and seventy five five hundred and ninety thousand barrels a day in 2026.

That means that we are going to increase something in between 25,000 to 40,000 barrels a day of production next year. We will be able probably in the guidance for the year at the end of the year to give you a more accurate figure. But the best approach I have today is rather speaking is there. Thank you, Matt.

Pablo, Investor Relations, Repsol: Thank you. Thank you very much, Matt. Our next question comes from Paul Redman at BNP Paribas, Exane.

Pablo, Investor Relations, Repsol2: Hi, and thank you very much for your time. Just two questions, please. The first one is just a confirmation on your guidance for net CapEx in 2026 and 2027. How much divestment are you including in that guidance? And the second one is just on the distributions.

You’re guiding to 30% to 35%, and you’re paying a buyback of €700,000,000 Is moving part on that guidance the macro environment essentially? You’re guiding €6,000,000,000 of cash flow from operations, whether that’s higher or low, tell you whether you’re at the top or the bottom of that range? Or is there any other movement that might happen on distributions from here?

José Ángel Fernández, CEO or Senior Executive, Repsol: Thank you, Paul. I mean, as I said before, roughly speaking, 7,000,000,000 net CapEx twenty twenty six, twenty twenty seven, you can’t expect, let me say, a positive effect in divestment terms coming from the E and P. I mean, because we I mean, we are not seeing, let me say, a disposal divestment process in the E and P in those years, we are not factoring in any case anything that could come from the liquidity event. We are not looking for money in this event. We are looking for the future growth and the future consolidation of our E and P profitable business.

So we are not taking into account any money coming from there. So the only difference between net CapEx and gross CapEx is going to come from the concept of rotations in the low carbon business. We will be more precise about that in the guidance for 2026 at the end of this year. Going to remuneration, I mean, again, I prefer to be prudent on that. EUR 6,000,000,000 is today the best approach we have in terms of remuneration, and we are comfortable with the percentage of distribution for our shareholders I mentioned before.

So the cash dividend plus the EUR 700,000,000 of buybacks we announced. So if things are different, will call about that in coming quarters. But today, I mean, in this volatile environment, I’m confident, I’m comfortable about what I’m seeing and what I’m announcing as guidance for coming months, but I prefer to be prudent before talking about upsides, growing and so on. Because I mean, Paul, and I know the volatile world and environment we are experiencing now and prudency is a good ally in these complex times. Thank you.

Pablo, Investor Relations, Repsol: Thank you, Paul. Our next question comes from Anis Kapadia at Policy Advisers.

Pablo, Investor Relations, Repsol3: Good afternoon. Just a couple of questions, please. I just wanted to get your view on, I suppose, the medium to longer term global gas markets as it seems like there’s a lot of LNG capacity that’s being built over the next few years, which should narrow the spread between Henry Hub and global LNG prices, gas prices down. So just wondering how you’re looking to navigate that market over the coming years. And then just going back to hydrogen, I was just wondering in terms of the various different ways of producing hydrogen, how you’re looking at that market.

So obviously, you’ve got the existing green hydrogen, but just wondering how you’re thinking about the blue hydrogen market and also the kind of natural or white hydrogen market where you could drill for the hydrogen at potentially lower cost? Thank you.

José Ángel Fernández, CEO or Senior Executive, Repsol: Thank you, Anish. So I’m not an expert on gas markets, but what we try to say because I mean, it’s part of our business, but it’s not the core of our business, is to try to be a bit balanced in the positions we have. You know that we are the main Iberian consumer of gas, so we have strong short positions in Iberia. And at the same time, we have long positions, some of them in The Gulf, in America and I mean, others in Europe, but mainly in America. So in the long term, we are going to try to be because you have to take into account that we are also growing in our gas retail market in Spain.

So if today, we could have, let me say, an excess in terms of comparing the long and short position close to one BCM, taking into account that we are going to grow in our retail gas market in Spain, let me say that we are quite comfortable seeing that probably, and I say probably because I don’t have a crystal clear, in three, four, five years, the LNG production in the world is going to grow and probably is going to cover in a quite easy way the current demand. So in this scenario, we prefer to avoid to have long positions in LNG and weak trend in this evolution because the consumptions I mean, I could elaborate a bit more because we are going to reduce the gas consumptions in our refineries because we are more efficient and so on, but we are growing at the same time in the retail market. So all in all, we trend to be balanced in the long term. And in the mix, are going to take advantage of this position because, I mean, the value today of this one BCM of excess capacity in Europe coming from the Gulf Of in America is going to have revenue for Repsol this year that could be at around $200,000,000 roughly speaking.

So that is the view we have. Going to your point, I couldn’t agree more about the approach of loving the blue hydrogen. I love it. In terms of I mean, combining the carbon capture with hydrogen production. But unfortunately, this blue hydrogen is not part of the European directive of the hydrogen that could be used to fulfill this mandate, this commitment because the definition is done in terms of renewable fuel with non biological origin and because it’s related to this carbon capture to an organic production.

So it’s not a non biological origin. So it’s not competing, let me say, with the green hydrogen to be able to cover this regulatory obligation that every operator in our case, of course, in the Iberian market. But in general terms, the European market has to fulfill in coming years. So I take your point. I agree, Anish, but I could I can’t use this blue hydrogen to fulfill this regulatory obligation.

Thank you.

Pablo, Investor Relations, Repsol: Was our last question today. With this, we will bring our second quarter conference call to an end. Thank you very much for your attendance.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.