CORRECTED-UPDATE 2-Repsol's LNG business shines ahead of sale

Thu Nov 8, 2012 7:43am EST

(Corrects to clarify net profit comparison in 4th and 5th paragraphs)

* Quarterly adjusted net profit beats forecast

* Profit driven by output in Libya and Bolivia

* LNG division strong before planned assets sale

* Shares up 1.8 percent

By Tracy Rucinski

MADRID, Nov 8 (Reuters) - Spanish oil firm Repsol beat third-quarter profit forecasts on Thursday, driven by higher output and a strong performance from its liquefied natural gas business ahead of the division's planned sale.

Repsol is trying to sell LNG assets in Canada, Trinidad and Tobago and Peru in a bid to boost its finances and credit ratings after losing control of its Argentine unit YPF.

Argentine President Cristina Fernandez took over Repsol's majority stake in YPF in April, raising concerns over the Spanish company's ability to fund development projects given that the unit accounted for half of group output.

Repsol recovered from the loss of YPF in the third quarter, posting an 89 percent rise in net profit adjusted for one-time items and inventory costs to 496 million euros ($633 million) from 262 million on a proforma basis a year ago.

This compares with the 429 million euros third-quarter net profit it posted last year when it still had majority control of YPF.

Repsol's shares, which have lost a third of their value so far this year, were up 1.8 percent at 1046 GMT on solid results across all of the company's divisions, though analysts said its future stock performance will hang on a successful LNG sale.

"Repsol needs this sale to generate fresh funds and continue reducing debt after the loss of YPF," Intermoney analyst Alvaro Navarro said.

In the third quarter, operating income from the LNG division surged 75 percent to 189 million euros, boosted by improved commercial margins worldwide.

Repsol has received at least five offers for the LNG package, which includes a 75 percent stake in a regasification plant in Canada, a 20 percent stake in a liquefaction plant in Peru and a 23 percent interest in the Atlantic liquefaction plant in Trinidad and Tobago.

The company has not provided an official valuation of the LNG interests but in a presentation in August said they had off-balance sheet debt of 3.6 billion euros and gross debt of 1 billion euros.

If Repsol does not sell the assets soon, it has said it will proceed with a plan to convert 3 billion euros of preference shares into equity, which would also be a way of cutting debt.

Credit rating agencies have warned Spanish companies they must reduce debt if they want to hang on to coveted investment grade ratings while Spain hovers on the brink of a downgrade to junk status in the midst of its sovereign debt crisis and recession.

Repsol's net debt reached 4.98 billion euros at the end of September, excluding the 3 billion euros of preference shares, down 4.9 percent from end-June.

OUTPUT GROWS

Repsol's exploration and production division also drove third-quarter profits thanks to a recovery in output in Libya and an additional pick-up in Bolivia.

The company's output rose 9 percent to 327,489 barrels of oil equivalent per day in the nine months to September from a year ago.

As for its traditional refining business, a 300 percent surge in margins mainly thanks to expansion at its Cartagena refinery helped compensate for a 9 percent decline in fuel sales in crisis-hit Spain and weakness in its chemicals division.

Adjusted CCS earnings before interest and tax (EBIT), which exclude special items and inventory holding effects, rose 64 percent to 1.3 billion euros in the third quarter compared with a Reuters poll average of 1.1 billion.

Repsol also said it made new discoveries in Algeria and Colombia, which mean the group has exceeded its 2012 target for new resources.

Back in Argentina, YPF reported a 51 percent decline in third-quarter net profit on Wednesday as domestic crude prices failed to keep pace with rising production costs. ($1=0.7840 euro) (Editing by Mark Potter and Mike Nesbit)

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