In the first nine months of 2020, Repsol posted an adjusted net income — which specifically measures the performance of the businesses — of €196 million. This result was achieved in a context of extraordinary difficulty that continued to be marked by the global health crisis, the drastic drop in crude and gas prices, and the collapse of demand.
In the third quarter, the company managed to improve adjusted net income by €265 million from the second quarter of the year, supported by its integrated business model, flexibility, and resilience, all of which enabled it to achieve a positive performance in a very adverse COVID-19 scenario that has accentuated the world recession. The positive cash flow registered in this period also demonstrated the effectiveness of the measures adopted in the Resilience Plan that were activated in March of this year.
In a context marked by the global pandemic, Repsol prioritized the continuity of its activity over the usual criteria of profitability, taking into consideration the essential nature of its products and services for society, to help it address the crisis. The company is keeping its facilities in operation and guaranteeing essential supplies of energy and raw materials needed for manufacturing a large part of the products used in the health sector, from the most basic and commonly-used to the more complex and advanced.
The situation generated by COVID-19 sharply impacted crude and gas prices, which fell steeply in the first months of 2020, especially in the second quarter when worldwide demand suffered its worst collapse in history. Between January and September, Brent crude fell by 36% and that of WTI by 33%, with average prices around 40 dollars a barrel for both indicators. For its part, the Henry Hub gas price fell by an average of 30%, with the average price in the period plunging to $1.9 per Mbtu.
The value of Repsol’s inventories was negatively impacted by the fall in the prices of reference raw materials, a total of €-1.047 billion during the period. Furthermore, in light of this context and in an exercise of financial prudence, the company revised its price deck for future crude and gas prices and adjusted downward the value of its Upstream assets, which is reflected in the specific items’ result of €-1.726 billion. All of this resulted in a net income for the first nine months of 2020 of €-2.578 billion.