Slide 1: Investor Update 1Q 2016
Investor Update 1Q 2016 Repsol Investor Relations © 2016-2020 Value & Resilience
Slide 2: Disclaimer
Disclaimer ALL RIGHTS ARE RESERVED © REPSOL, S.A. 2016 Repsol, S.A. is the exclusive owner of this document. No part of this document may be reproduced (including photocopying), stored, duplicated, copied, distributed or introduced into a retrieval system of any nature or transmitted in any form or
Slide 3: 2016-2020 Value & Resilience agenda
2016-2020 Value & Resilience 1. Company Overview 2. Key strategic lines 2016-2020 3. Progress of Strategic Plan 4. Upstream 5. Downstream 6. Gas Natural Fenosa 7. Financial Outlook 8. 2016 Outlook
Slide 4: Company Overview
Company Overview 1
Slide 5: 1Q16 key messages
Company overview 1Q16 key messages Net Income: Strong in a volatile market Net Debt: Stable post dividends Strategy: On target and making progress Production: Double compared to Q1 15 Cash Flow: Downstream as FCF generator Portfolio: As of today €2.8 Billion in disposals 5
Slide 6: Repsol today - An integrated company operating across the entire value chain
Company overview Repsol today - An integrated company operating across the entire value chain ~2.4 billion boe Integrated Delivery on proved reserves (*) business model commitments >700 kboepd Diversified and global production portfolio ~1 million bpd World-class explorer refining capacity Core busi
Slide 7: Repsol's shareholders
Company overview Repsol’s shareholders 10.24% Caixabank S.A. 8.48% Sacyr Vallehermoso, S.A. 4.95% Temasek Institutional Retail Free Float Investor Free Float 76.33% 14.20% Total number of shares as of May 2016: 1,442 million 7
Slide 8: Key strategic lines 2016-2020
Key strategic lines 2016-2020 2
Slide 9: Key strategic lines 2016-2020: Value and resilience
Key strategic lines 2016-2020 Value and resilence VALUE RESILIENCE Shift from growth to value Top tier resilience among integrated delivery, prepared companies for the next growth wave Self-financing strategy even in a Commitment to maintain shareholder stress scenario compensation FCF breakeven aft
Slide 10: Shift from growth to value: Upstream production evolution
Key strategic lines 2016-2020 Shift from growth to value // Upstream production evolution // kboepd 1,000 • Achieved critical mass in E&P business 800 x2 • Extensive portfolio of assets and 600 development projects 400 200 • Optionality to improve portfolio value by divestments 0 2014 2016 2020 Port
Slide 11: Additional investment reduction for 2016 and 2017 around €1.8B
Key strategic lines 2016-2020 Additional Investment reduction for 2016 and 2017 around €1.8B // Group annual Investment (1) // $B 8 ~ 46% • Capex optimization and implementation ~ 35% of our efficiency measures. 6 • Low Downstream capital requirements 4 + • Deferring non-critical investment in devel
Slide 12: Strict accountability on Efficiency Program
Key strategic lines 2016-2020 Strict accountability on Efficiency Program Pre-tax cash savings // 2016 // // 2018 // • Recurrent synergies target increased to Synergies €0.2 B €0.3 B 400M$ • 50% of synergies already implemented Upstream Opex & Capex efficiency €0.6 B €1.1 B • Upstream program ahead
Slide 13: Synergies from Talisman integration are already being delivered
Key strategic lines 2016-2020 Synergies from Talisman integration are already being delivered // €250M in 2016 of which ~200M already captured // M$ 450 $ 400 M/y 400 $ 350 M/y • Finance: repurchase of Talisman bonds and joint 350 financial optimization 300 • People and Organization: workforce and 2
Slide 14: Breakevens
Key strategic lines 2016-2020 Breakevens // Group FCF breakeven after dividends and interests (2016-2017)(*) // $/bbl 60 45 30 15 0 Strategic Update Plan (*) Scenario used to estimate breakevens (Stress case): Brent price of 40 $/bbl for 2016 – 2017, and 50 $/bbl flat 2018 – 2020; HH price of $2.6/M
Slide 15: Repsol profits from a high Downstream/Upstream leverage
Key strategic lines 2016-2020 Repsol profits from a high Downstream/Upstream leverage // Avg 2010-15 R&M integrated margin (1) x 2015E // Avg 2010-15 R&M integrated margin (1) x 2015E Downstream / Upstream leverage ($/bbl) // Downstream / Upstream liquids leverage ($/bbl) // 20 8 18 7 16 6 14 5 12 4
Slide 16: Self-financed Strategic Plan even under the stress scenario
Key strategic lines 2016-2020 Self-financed Strategic Plan even under the stress scenario €B // Cash movements 2016-2020 // 35 • Reduction of our capex budget in 2016 below €4B • Investment reduction for 2016 and 2017 around 30 ~6 €1.8B ~29 ~4 25 Cash for • Aceleration of efficiency and synergy targ
Slide 17: Progress of Strategic Plan
Progress of Strategic Plan 3
Slide 18: Strategic Commitments Follow up
Progress of Strategic Plan Strategic Commitments Follow up Exploration Capex in 2016 Deferral of non-critical investments €3.9B Capture of sector wide deflation Re-visit on-going development projects Target represents more than half of the 2018 objective Upstream: Efficiency & Synergies
Slide 19: Progress of Strategic Plan: commitments follow up
Progress of Strategic Plan Strategic Commitments Follow up Target 2016 2016 Estimate Efficiency & Synergies 0.2 0.2 Synergies Capex Target 16-17 1Q2016 Efficiencies 0.9 1.0 Flexibility(3) Program Repsol Capex (B€) ~3.9 0.8 Total (B€) 1.1 1.2 (3) Target excluding G&G and G&A. Target 16-17 1Q2016
Slide 20: Portfolio management
Progress of Strategic Plan Portfolio management Wind Sale of our offshore wind power business in the UK for 238 million euros • After tax capital gain of 109M€ Power • Cash from this sale is expected to be received during 2Q 2016 Sale of Repsol’s 10% stake in CLH CLH • We sold our stake in CLH for 3
Slide 21: Upstream
Upstream 4
Slide 22: Upstream core regions in the portfolio
UPSTREAM 3 core regions in the portfolio North America: Growth Production 2016: ~188 kboepd Operatorship: ~79% Gas production (2016): 71% • Unconventional portfolio Latin America: FCF SouthEast Asia: FCF & Growth • Operatorship Production 2016: ~302 kboepd • Valuable midstream positions Production 2
Slide 23: An extensive pipeline of organic opportunities
UPSTREAM An extensive pipeline of organic opportunities // Exploration // Contingent resources • Unconventional North America • Brazil: Campos-33, Sagitario • Russia: Karabashky • Colombia: CPO9 & Niscota • Alaska: Colville High • GOM: Leon • Indonesia: Sakakemang North America • Vietnam: Red Empero
Slide 24: Projects activity in 2016
UPSTREAM Projects activity in 2016 NORTH AMERICA NORTH SEA ALGERIA Redevelopment Reganne & Mon-Arb and Sud-Est-Illizi Flyndre Cawdor Duvernay/G. Edson Marcellus Eagle Ford VIETNAM Red Emperor Gulf of Mexico COLOMBIA Akacias MALAYSIA Redevelopment Kinabalu and Bunga Pakma BRAZIL Plateau Sapinhoá Firs
Slide 25: Portfolio management: Flexibility to optimize capital allocation
UPSTREAM Portfolio management: Flexibility to optimize capital allocation // Upstream Investments(1) // (Billion $) 6.7 ~ 53% 1.9 ~ 44% 3.7 ~ 17% 1.0 3.1 (2) + 4.8 0.4 2.8 2.7 2014 2015 2016 Exploration Development ($/bbl) // CAPEX(3) per barrel produced W.I // 30 25.4 25 20.2 20 17.2 13.7 14.5 15 1
Slide 26: Portfolio management: Capex
UPSTREAM Portfolio management: Capex “Capex optimization has no impact on production because we are benefiting from the end of the previous investment cycle from Repsol's legacy assets (Average RRR 2011-2013: 214 %) ” kboepd 800 // Production evolution // 600 RRR: 159%(*) 400 RRR: 118% 200 0 2014 20
Slide 27: E&P Cost Efficiency Program
UPSTREAM E&P Cost Efficiency Program // Levers // €1.1 B/y Business units • Technical standardization savings • Operational uptime increase (Opex & Operational • Procurement & logistics optimization by 2018 Capex) • Organizational right-sizing • Post -FID projects: Efficiency gains, scope challenge
Slide 28: Examples of improvements in Talisman legacy assets
UPSTREAM Examples of improvements in Talisman legacy assets UK MARCELLUS Improved Recovery Factor: Marcellus Fracking pricing: • Develop a prioritized inventory of qualifying Marcellus frac cost per stage capital projects to be used in the asset USD Thousands/year strategy definition. Improved Opera
Slide 29: Downstream
Downstream =)
Slide 30: Downstream to provide sustainable value
DOWNSTREAM Downstream to provide sustainable value Maximize • Taking advantage of the integration between refining and performance marketing businesses with focus on reliability • Discipline in capital allocation Capital discipline • Divestments of non-core assets for value creation Margin improveme
Slide 31: Repsol's refining margin indicator evolution
DOWNSTREAM Repsol’s refining margin indicator evolution Margins back to a mid cycle scenario Base Repsol Crack Index1 2005-2020 Repsol Refining margin index evolution ($/bbl) ($/bbl) 10 -28% 10 8.8 0.5 8 8 6.4(*) 4.0 6 6.6 6 0.7 4 3.0 4 Avg. 3.6 4.3 2 2 2.7 4.3 2.7 1.5 3.0 0 0 High margins Low margi
Slide 32: Fundamentals support sustained Repsol refining margins
DOWNSTREAM Fundamentals support sustained Repsol refining margins Lower Opex Lower oil and gas prices Growing refined Average demand growth of 1.2% for 2016-2020 on top of strong 2015 demand products demand Spain fuels demand growth at 4% in 2015 European refineries at high Lower EU effectiv
Slide 33: Downstream efficiency and margin improvement program
DOWNSTREAM Downstream efficiency and margin improvement program ~€0.5 B/y from Downstream efficiency improvement in 2018 // Projects // // Levers // // EBIT increase by 2018 // • Energy cost reduction • Improved planning to increase crude supply flexibility Refining ~€250 M/y • Operations optimizati
Slide 34: 2016-2020 Downstream strategy
DOWNSTREAM 2016-2020 Downstream strategy Maximizing value and cash generation leveraged on fully invested assets // Sustainable value from quality assets // // Investment discipline // Repsol in leading position among european peers Margen integrado(*) de R&M (Repsol frente al sector European Integr
Slide 35: Gas Natural Fenosa
gasNatural ey fenosa Gas Noeturel Fenosa 0)
Slide 36: Gas Natural Fenosa: strong profitability with long term strategic vision
Gas Natural Fenosa Strong profitability with long term strategic vision (*) (*) Dividends received in 2012-2015 period ~ € 1.1 b 36
Slide 37: Financial Outlook
aad | Financial OUTLOOK
Slide 38: Financial outlook
Financial outlook Financial Strategic Plan 2016-2020 Sound track record Resilient Plan with Conservative in managing adverse stronger business profile financial policy conditions Commitment to reduce debt The three Rating Agencies, Standard & Poor’s, Moody’s and Fitch, confirmed and maintained our p
Slide 39: 1Q2016 Net Debt evolution
Financial outlook 1Q2016 Net Debt evolution (Billion €) // Net Debt Evolution after paying dividends // 0.71 0.27 12 0.03 10 (0.94) 8 ~11.9 6 ~11.9 4 2 0 Net Debt 31st Dec Operating Cash Flow Capex & Dividends paid Others Net NetDebt Debt30th 31stMar Mar 2015 Divestments 2016 2016 • Fitch, Standard
Slide 40: 2016 Outlook
2016 Outlook 8
Slide 41: 2016 Outlook
2016 Outlook In July Repsol will pay a complementary dividend of €0.30 gross per share. 2016 Downstream business expected free cash flow ~€3 billion. Keep our production level at around 700,000 barrels per day in 2016. Capex and Opex optimization to protect Free Cash Flow from our businesses