Repsol YPF Essay ⋆ Business Essay Examples ⋆ EssayEmpire

Repsol YPF is an integrated international oil and gas company with headquarters in Madrid, Spain. It operates in more than 30 countries and is the industry leader in Spain and Argentina. It is one of the 10 major private oil companies in the world and the largest private energy company in Latin America in terms of assets. The main oil and gas reserves are in Latin America and in North Africa.

The company is part of some of the most representative stock market indexes, such as FTSE Eurotop 100, Dow Jones Stoxx 50, and the Standard & Poor’s Global 100. Since 2003, it is included in the FTSE4Good. In previous years, Repsol YPF has kept a leadership position in global sustainability indexes such as DJSI World (Dow Jones Sustainability Index World) and the European DJSI STOXX (Dow Jones Sustainability Index Stoxx), with maximum punctuation in transparency and social and human capital development. Principal consolidated financial data for 2007 are as follows (in millions of euros): income from operations, 5,808; net income, 3,188; EBITDA, 8,573; operating revenues, 55,923; investments, 5,373; net debt, 3,493. Its number of employees was 37,565.

The main activities of the company are based in the following:

Oil and gas exploration and production activities (in 2007, oil and gas production totaled 1,039 million barrels of oil equivalent per day)
Oil refining activities in which it leads the sector in the Spanish and Argentinean markets, and is also present in Peru and Brazil
Oil products marketing in 12 countries in Europe and Latin America through a network of over 6,500 points of sale
Chemical activities, which are carried out principally in Spain, Argentina, and Portugal, and basic petrochemical production, which focuses on obtaining olefins and aromatics
Gas and power activities, which comprise natural gas supply, storage, transport, distribution, and marketing in Spain and Latin America

Repsol YPF is the result of the acquisition in 1999 of YPF, the largest oil company in Argentina and the 12th largest in reserves, by Repsol, the dominant oil company in Spain and the 13th largest in the world in reserves. Repsol was founded in 1987 when the Spanish government consolidated various state-owned oil and gas assets. The government sold 24 percent of the firm to public investors in 1987, another 66 percent in 1996, and the remaining holdings in 1997. Its shares were quoted on the Madrid Stock Exchange and in the form of ADRs on the New York Stock Exchange. At that point, Repsol had operations in 26 countries and Latin America was the center of Repsol’s expansion strategy. Prior to the YPF bid, Repsol had acquired refining assets in Peru and had a control majority in Astra, the fifth-largest energy company in Argentina since 1996. YPF, Argentina’s largest company, was engaged mainly in exploration, development, and production of oil and natural gas, and electricity-generation activities, among others. The acquisition of YPF by Repsol facilitated the strengthening of upstream business, the international expansion of the company, and the diversification into gas and power generation.

Currently, some of the main risk factors that Repsol YPF faces are the fluctuation in the exchange rates of the U.S. dollar against the euro, the changes of international reference crude oil prices, the concentration of operations in a few big markets, and the political instability and the negative regulatory environment and outlook for the oil and gas industry in some developing countries.

The main lines set up in the 2008–12 Strategic Plan of the company focus on the expansion of production and reserves, geographical diversification of activities, operational excellence as a low-cost operator, and profitability through an increase in average unit margins. In this sense, in the previous years there has been a strengthening of the company’s position in some strategic geographical areas such as the Gulf of Mexico, North Africa (especially Libya and Algeria), Trinidad and Tobago, Peru, and Brazil. In April 2008, the company, jointly with Petrobras and British Gas, participated in the exploration of one of the biggest new oil fields in the world, located in the Santos Basin (Brazil) in the Atlantic Ocean. Biofuels and liquefied natural gas represent two key strategic areas for the company in upcoming years.

Bibliography:

Robert F. Bruner, Case Studies in Finance: Managing for Corporate Value Creation (McGraw-Hill, 2002);
Coloma, “The Effect of the Repsol-YPF Merger on the Argentine Gasoline Market,” Review of Industrial Organization (v.21/4, 2002);
Repsol YPF, Annual Report 2007, www.repsol.com (cited March 2009).

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