OREANDA-NEWS. August 09, 2013. Domestic Business Activities and a Drop in Crude Oil Sales Hinder the Group’s Earnings.

Earnings from international business operations account for 63% of the Group’s Net Income

Weak consumer demand, tight marketing margins and a challenging environment for refining activities all hampered the Company’s domestic businesses

Capital expenditures in the first half of 2013 amounted to EUR465 million

As a key development in the period, CEPSA was awarded two exploration blocks in offshore Brazil

Clean CCS net income for the first six months of 2013 (calculating changes in inventory values at replacement cost and factoring out non-recurring items) totaled EUR199.9 million, falling  20% (-€50.3 million) year-on-year.

Underlying the decline in earnings were the following factors:

Lower production and sales of crude oil, compounded by a 6% drop in the price of benchmark Brent (Upstream).

Depressed refining margins and a sluggish domestic market for motor fuels, which fell 6% (Downstream).

New energy price regulations accounted for the decrease in Gas & Power and the Group’s consolidated earnings in general, as compared to the same period last year.

Applying International Financial Reporting Standards (IFRS) which use the weighted average cost method of accounting for valuing inventory, net income in the first two quarters of 2013 stood at EUR 124.1 million, a decrease of 62% (-EUR 204.6 million) from last year, with - EUR 154.3 million attributable to price fluctuations in crude and refined product inventories and non-recurring items.

Out of total CCS net income in the period, earnings from business activities abroad, mainly in E&P, Petrochemicals and fuel exports, accounted for 63% whereas the remaining, 37%, was derived from domestic business activities.

Capital expenditures in the first half of 2013 amounted to EUR 465 million, rising EUR 60 million from the previous year. Net debt stood at EUR 1,473 million, with a net debt-to-equity ratio of 19%.

Regarding safety performance indicators and reflecting its efforts to make safety a priority goal, CEPSA recorded all-time lows in its lost-time injury frequency rate, coming to roughly 2.5 (accidents per million hours worked).