Production targets slightly revised downward but Venezuelan operations progressing steadily; Repsol focuses on organic growth and shareholder returns, with refining margins being the biggest performance uncertainty

(1) The CEO of Repsol has revised the year-end production target to 600,000 barrels of oil equivalent per day, lower than the previous expectation of 650,000 to 700,000 barrels. However, he emphasized that production in Venezuela has not been affected by the earthquake and stated that they have full support from the US to increase output in the country. (2) Regarding shareholder returns, the company made it clear that, apart from share buybacks, it will not consider other mechanisms such as special dividends. It will also remain cautious about acquisitions, expecting no M&A opportunities in the coming year, and will focus on an organic growth strategy. (3) In the refining business, maintenance work in the third quarter is expected to be completed smoothly. The company holds an optimistic outlook for refining margins in 2027 and pointed out that the Russia-Ukraine conflict could have a greater impact on the European refining market than tensions in the Strait of Hormuz. (4) With respect to geopolitical risks, the company has prepared contingency plans for a worst-case scenario in Hormuz, possesses sufficient kerosene capacity to meet domestic demand, and can supply up to 30% of its excess output to other countries. Even if the crisis is quickly resolved, this year's refining margin is still expected to exceed $20 per barrel. (5) Preparations for listing the upstream business in the US are complete, but it is not a current priority and will not be advanced this year; legacy debt issues in Venezuela have been shelved for future discussions. (6) From an energy sector stock perspective, the slight adjustment in production targets reflects a pragmatic operational approach, while high refining margin expectations resonate with geopolitical risk premiums. Coupled with a record number of summer tourists in Spain boosting downstream business, the company as a whole still demonstrates considerable earnings resilience.