Repsol (REP.MC) Higher for longer refining, high-quality upstream growth and sector-leading 11% 2026 SH returns; Buy

Research evidence excerpt

Repsol (REP.MC) Higher for longer refining, high-quality upstream growth and sector-leading 11% 2026 SH returns; Buy

Goldman Sachs Repsol (REP.MC)

We continue to see 2H26/2027 earnings upside on refining strength

2Q26 results: strong Industrial delivery, FCF generation and deleveraging. Repsol

reported adjusted net income of €1.84bn, 12% above consensus, driven primarily by a

sharp improvement in Industrial earnings, which reached €1.2bn. The company

generated €3bn of CFFO excluding WC, while reported operating cash flow was

impacted by a €1.0bn working capital build related to higher inventories and

security-of-supply measures. Despite this inventory build, net debt decreased by €1.1bn

qoq to €3.7bn, supported by strong underlying cash generation and renewable asset

rotations.

Refining strength continues to exceed expectations. Repsol reported a $24/bbl

realized refining margin in 2Q26, consisting of a $14/bbl benchmark refining margin and

a $10.3/bbl premium. Management attributed approximately $2.2/bbl of this premium

to biofuels, $2-3/bbl to crude slate optimization and wider heavy-to-light crude

differentials, while the remaining $5-6/bbl was driven by product yield optimization,

particularly maximizing exposure to jet fuel and middle distillates during a period of

severe market tightness. Industrial earnings also benefited from stronger chemicals and

trading results, while biofuels generated more than €100mn of EBITDA in the

quarter.

Operationally, downstream momentum strengthened further during the quarter.

Repsol processed 9.8mt of crude (+6% yoy), while refinery utilization improved to 79%

distillation and 89% conversion. The recently commissioned 200ktpa Puertollano HVO

unit started operations in April, increasing exposure to renewable diesel and SAF

markets.