Repsol slashes reserves, production plan over Bolivia

AFP
MADRID
Petroleumworld.com 01 27 06

Energy group Repsol YPF slashed estimates of its gas reserves and planned production in Bolivia on Thursday owing to a tax increase last year.

The revisions, also affecting reserves in other South American countries, are set against uncertainty over the effects of plans by the new Bolivian government to nationalise energy resources.

Trading in shares of the Spanish group was suspended after the company had announced a 25.0-percent reduction in its estimated proved energy reserves expressed as the equivalent in barrels of oil.

Trading was resumed in early afternoon. The share fell by 8.31 percent to 22.72 euros after finishing Wednesday with a gain of 0.36 percent to 24.78 euros.

Repsol said that it would make further revisions to its world-wide reserves at the end of February and said it hoped that "this will not give rise to extra, significant changes".

Company shairman Antonio Brufau predicted that the lowered estimates would have a limited effect on 2006 net earnings.

"The impact on finances should be relatively moderate, on the order of 170-180 million euros (208-220 million dollars) in 2006," he told a press conference.

The company also slashed its forecasts for production in Bolivia by 20.0 percent for the 2005-2009 period, and by 4.4 percent in Argentina.

The cut in proved reserves was equivalent to 1.25 billion barrels of oil, the company said.

Repsol said that 52.0 percent of the reduction was the result of concerns about changes to legislation in Bolivia. A further 41.0 percent of the reduction related to Argentina, and the remaining 7.0 percent was from cuts to proved reserves in other countries, notably Venezuela.

Newly elected left-wing Bolivian President Evo Morales has promised to nationalise Bolivian natural hydrocarbon resources. The country relies heavily on foreign energy companies.

However, Repsol said that the cut in reserves would have a downward impact on the value of its assets of less than 50 million euros (61.0 million dollars). And it expected its results for the whole of 2005 to be in line with performance in the first nine months of last year.

Repsol said that 52.0 percent of the reduction of its reserves, or 659.0 million barrels of oil equivalent, related to Bolivia, owing to "uncertainty" arising from a change in tax made in May of last year.

The law was introduced in Bolivia before the recent election of Morales, the first indigenous Indian president, and raises the extraction taxes and royalties on hydrocarbons to 50.0 percent.

The company said on Thursday: "Some (gas) fields and projects are no longer viable from a commercial point of view."

On Monday, the new Bolivian Hydrocarbons Minister Andres Soliz had said that he would register immediately the country's gas and oil reserves as a national asset.

There had been uncertainty about how the new government's plans for hydrocarbon assets, and to re-draw extraction contracts with energy companies, would affect the way these companies accounted for the reserves and for their contracts.

The announcement on Monday led analysts to question whether Repsol could consider its reserves in Bolivia as its own. These reserves amount to about 26.0 percent of all reserves held by Repsol.

The reduction of reserves in Argentina amounts to 41.0 percent of the total reduction, or to 509 millions barrels of oil equivalent. This reduction reflected uncertainty over the renewal of concessions.

The reduction in Venezuela amounted to 4.7 percent of the total cut and reflected "the migration of existing contracts to agreements for the creation of joint companies" involving the state company PDVSA, Repsol said.

The company said it did not expect these revisions "to have a negative impact on the company's strategy in coming years".

In the first nine months of last year, Repsol made a net profit of 2.584 billion euros, an increase of 23.9 percent from the equivalent figure in 2004.

The price of shares in Repsol had ended on Wednesday with a gain of 0.36 percent to 24.78 euros.

In January 2004, the British-Dutch oil group Royal Dutch Shell caused a sharp fall in its share price and upheaval in the boardroom by announcing a 20.0 percent reduction of its proved reserves, a reduction later revised to 23.0 percent.

However, the causes were different, arising from incorrect procedures for estimating and revising the reserves, and the group was fined 150 million dollars by US and British stock market regulators.

AFP 01/26/06

Copyright © 2006 AFP. All rights reserved

 

 

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