First quarter 2000 net profit, before all the company’s goodwill amortisation, was 139.2% up on year earlier figures at 622 million euros. Repsol YPF reported net income for the period (after goodwill amortisations) was 495 million euros, showing a rise of 114.3% over that obtained in the first quarter 1999.

Operating income was 1,324 million euros, and was 213% up on the figure obtained a year earlier. Cash flow, at 1,378 million euros, showed a year-on-year rise of 123.7%.

This was the first time that Repsol YPF operating income and all financial statements included 100% consolidation of the Gas Natural Group from January 1st, as agreed with la Caixa last January, and already mentioned in our fourth quarter 1999 preview of income statement.

There has clearly been a spectacular jump in Repsol YPF results this quarter, influenced by two important circumstances. The first of these was the acquisition of YPF in June 1999, which radically changed the structure of the company; and the second was the high level of oil prices, which reached a maximum in mid-March.

On the negative side, international refining margins were low over the quarter, as a result of constantly rising oil prices, and there was a considerable narrowing of marketing margins, as it was impossible to raise retail fuel prices to fully cover the higher oil and oil product prices.

In the first quarter 2000, the company made investments of 938 million euros, in comparison to 2,214 million euros in the first quarter of 1999, which already included the 15% acquisition of YPF.

Since our last quarterly report, there have been several events we would like to mention here:

Repsol YPF and Petrobras signed two agreements on March 27^th last, defining the terms for an asset swap. The first agreement referred to the swapping of upstream and downstream assets, for which a final valuation will be reached on June 30^th next, and the second established a commitment between both companies to study joint ventures in natural gas in the southern cone.

Secondly, in March, through its 100% affiliate Gas Natural Mexico, Gas Natural SDG acquired 42.65% of Semsa, which in turn owns 100% of the Mexican company Metrogas. Metrogas holds a concession to distribute gas in the Federal District of Mexico and has a customer list of 100,000, to which it expects to add 450,000 new customers by the end of 2003.

Gas Natural SDG obtained a concession to distribute piped gas to the south of the State of Sao Paulo (Brazil), covering an extension of 53,000 square kilometres, with 2.5 million inhabitants. The concession includes 93 municipalities of which four have over 100,000 inhabitants, and some 6,000 industries.

Finally, on March 13^th, the Government of Trinidad and Tobago formally approved an extension to the Atlantic LNG liquefied natural gas plant, permitting Repsol YPF to immediately acquire a 10% stake (plus an optional 20% stake in 2003) of all BP Amoco upstream assets in that country.

In fact, there has been a recent gas discovery, again with BP Amoco, in Block 5b of this field, in which our company has a 30% stake. Appraisals to date indicate that Repsol’s percentage of net reserves from this find will be 100 million boe.

In the area of new technology, there were also two important events during the quarter:

Repsol YPF joined with other leading energy companies in launching an e-procurement exchange for the acquisition of goods and services, and also became a charter member of the ChemConnect portal, a leading e-commerce network specialised in chemical products.

Finally, there were three other highlights in the period, relating to corporate finance.

On March 23^rd last, the Repsol YPF Board of Directors decided to propose to the Annual General Shareholders’ Meeting a final dividend per share of 0.26 euros, 5% up on that paid in 1999. The gross overall dividend will therefore be 0.42 euros per share, representing a 49.4% pay-out against the company’s net income.

Standard & Poor’s upgraded the outlook for ratings on Repsol YPF to stable, and affirmed its current credit ratings at "A-2" for short term credit and "A-" for long term credit.

Operating income for this activity in the first quarter of 2000 was 745 million euros, in comparison to 10 million euros obtained in the same period a year earlier, and 639 million euros registered in the fourth quarter 1999. On the figure for this quarter there is a deduction of 53 million euros in goodwill amortisation relating to the YPF acquisition.

During this first quarter, the price of crude oil rose steadily to reach an average of $26.90 per barrel of Brent, as opposed to the $11.28 per barrel at which it was sold in the same period a year earlier, and the average price of $24.12 per barrel in the last quarter of 1999. This situation was accentuated by a 13.6% year-on-year dollar revaluation against the euro, and a 5.3% revaluation from the last quarter to this, which boosted income in this area.

The contribution from YPF to quarterly E&P operating income was 560 million euros.

Production was 947,660 barrels per day, and was much higher than for the same period last year, because first quarter 2000 figures include YPF production. In comparison to fourth quarter 1999, the average production level fell 4.4%, mainly as the result of the divestment of exploration and production assets.

If, for calculation purposes, the foregoing divestments were ignored, net production would have shown a slight 1.5% increase, despite the negative effect of production sharing contracts, which limit concession holders’ net production when oil prices rise.

Investments

First quarter 2000 operating income from refining and marketing activities was 250 million euros. It is the first time that LPG results have been included under this business division, and they amounted to 49 million euros. If we exclude this figure, operating income for this activity was 1.9% below that for the same period a year earlier, but 13.5% higher than in fourth quarter 1999.

Refining margins in Spain, at $1.67 per barrel, were slightly higher than in the same quarter a year earlier and 27% up on fourth quarter 1999. The distillation level in Spain was 7% down on year earlier figures, at 8 million metric tons, and 31% down on the preceding quarter.

In Argentina, refining margins showed a slight 4% improvement with respect to the fourth quarter of 1999, and distillation was 27% lower than in the last quarter of 1999.

However, marketing margins, at their lowest for several years, resulted in a zero profit situation for the marketing division.

Moving on to logistics, CLH transported 4.7% less products than in the first quarter 1999, mainly as the result of mild weather. However, automotive fuel rose 2.5%.

Sales of gasoline and gas oil in Spain, excluding those to other operators, were 0.4% higher, with a 0.5% increase in gas oil, and 11.3% in aviation kerosene. Gasoline sales fell 4.7%, and fuel-oil 50.3%.

As already mentioned, this is the first time LPG results have been reported in this business division. The 49 million euros of net income from LPG was curtailed by the prize freeze on bottled LPG since last October, and showed a loss of 44.9% in comparison to year earlier figures.

Investments

Operating income from chemicals for the first quarter of 2000 was 61.9% up on year earlier figures, at 34 million euros, and 27.6% lower than in the fourth quarter, 1999.

This year-on-year improvement was mainly due to higher income from derivative chemicals, where margins on polyolefins rose, and especially to sales growth in intermediate products (acrylonitrile and styrene). Income from base chemicals was similar to first quarter 1999.

The fall in income from one quarter to another was the result of lower income from base chemicals, which was curtailed by a sharp rise in naphtha prices. This rise was not counterbalanced by an equivalent increase in base chemical prices, and considerably narrowed margins. This negative factor was partially mitigated by higher net income from derivatives.

Total sales of petrochemical products were 41.5% up in relation to the first quarter a year earlier, at 743 Kt, and showed a 10.3% increase over fourth quarter 1999 figures.

Investments

First quarter 2000 operating income from the Repsol YPF gas and power area posted a 191.1% rise over the same period of 1999, jumping to 294 million euros. This improvement was mainly the result of consolidating 100% of the Gas Natural Group results from January 1^st 2000 onwards. On equal accounting terms, a rise of 41.5% was registered, mainly from higher sales in Spain and Latin America.

Gas and power operations in Latin America generated 21 million euros over the first three months of 2000, and this was 425% more than that obtained in 1999. Growth on the same terms (with proportional consolidation of Gas Natural) would have been 250%. This performance was the result of economic recovery in the countries where the company operates, and the current euro/$ exchange rate.

In relation to the power division, Repsol YPF would like to make it clear that it has no intention of acquiring Iberdrola or any other power company.

In this quarter, 12,335 million thermies of natural gas were sold by Repsol YPF through Gas Natural and its affiliates to the residential and commercial sector in Spain and Latin America, showing a 9.4% rise over equivalent 1999 figures. This improvement may be attributed to growth in the customer list, which compensated for high temperatures in Spain during February and March.

The full customer list to which Repsol YPF distributed natural gas directly or indirectly at the end of the first quarter 2000 was 8,318,000, of which 3,352,000 were in Spain, and the remainder in Latin America. In consolidated terms (i.e. based on the net shareholding in each of the proportionally consolidating companies), the Group distributes gas to over 6,300,000 residential and commercial customers, all of these pertaining to the Gas Natural Group, except for 856,000 proceeding from Astra’s stake in Metrogas.

Investments

Net financial expenses for the first quarter of 2000 were 289 million euros, in comparison to 86 million euros registered for the same period a year earlier.

This sharp increase was mainly the result of a higher net debt, which rose from 5,649 million euros at March 31^st, 1999 to 19,266 million euros at March 31^st 2000. Apart from the YPF acquisition, consolidated financial debt was swelled this quarter by the incorporation of 100% of the Gas Natural Group debt, to the amount of 1,416 million euros.

However, a comparison of the foregoing aggregates with those for the fourth quarter 1999, shows that financial expenses have remained at a similar level (289 million euros in the first quarter 2000, and 287 million euros in the fourth quarter 1999), despite the full incorporation of Gas Natural expenses, to the amount of 24 million euros.

Net debt rose from 17,136 million euros at December 31^st, 1999 to 19,266 million euros at March 31^st, 2000. This increase may be attributed to the aforementioned consolidation of 100% of Gas Natural debt (1,416 million euros) and revaluation of the dollar against the euro during the first quarter 2000, which raised the counter-value in euros of our financial debt (practically all denominated in dollars) by 965 million euros.

Net income from unconsolidated affiliates this quarter was 17 million euros, in comparison to 15 million euros in the first quarter of 1999.

Strictly speaking, goodwill amortisation for the first quarter of 2000 was 63 million euros, of which 49 million euros related to the YPF acquisition.