Having completed the process to acquire the Argentine company YPF, the company has decided to write off the expenses connected with the operation during this second quarter. Although these expenses could have been capitalised as higher acquisition price and been entered under the caption, "Goodwill", Repsol-YPF decided to write off these costs during this financial year in order to optimise its financial-tax recovery. It is worth remembering that goodwill amortisation is not tax deductible.

The amount to be written off, before a 35% tax reduction, was 27,103 million pesetas, and this has been registered as an extraordinary expense against the second quarter of this year.

Apart from the foregoing, 6,200 million pesetas were set aside as a provision for manpower restructuring.

In this case, the philosophy followed by Repsol breaks with the tradition in Spain of capitalising as higher acquisition value the main costs of mergers and acquisitions. It is, however, in line with best practice in the international oil sector and gives highest return to the shareholder by immediately deducting from the tax base all the non-recurring expenses liable to this treatment and largely provisioning for future restructuring costs. In this way, the new company emerges stronger, better-balanced and free from any restrictions from the past.

Repsol’s net income for the second quarter of 1999 was 8,796 million pesetas. Excluding the effect of the aforementioned write-offs, this figure was 15.1% lower than that obtained in the same period of 1998. Quarterly operating income, at 63,162 million pesetas, was 4.5% below year earlier results, and net cash flow, at 80,813 million pesetas, fell 0.6%.

Net cash flow for the first half was 183,238 million pesetas, showing a 3.6% rise over the first half of 1998. Operating income, at 133,589 million pesetas, dropped 2.8% in comparison to the same period a year earlier, and net income, at 47,225 million pesetas, was 36.3% less than in 1998, although this would adjust to a negative 4.8% if the same accounting criteria were applied.

These income figures, the last to be given under the name of Repsol, show that the company has performed satisfactorily throughout a very difficult period for all oil companies. Refining and chemical margins have been very low, especially during the second quarter, and oil prices were also very low at the beginning of the year, recovering slowly from March onwards.

The new company, Repsol-YPF, will begin operations in a better international environment, where oil prices have recovered and downstream margins are at a higher level than in this second quarter.

This improved situation, together with the write-off this quarter of most expenses and restructuring costs relating to the YPF deal, would indicate that the year will be divided into two distinct halves, one negative and one positive.

Even so, it is important to note that this quarter, and in the first half of 1999, the company has practically maintained operating income and net cash flow levels in one of the most difficult business contexts to date. Indeed, this is the best indication so far of the degree of efficiency achieved by the company, which has largely permitted it to recover from the effects of this crisis.

In the second quarter 1999, Repsol made investments of 2.16 trillion pesetas, basically as a result of acquiring a further 82.5% stake in YPF, following the positive response of almost all former YPF shareholders to the recent Public Tender Offer. The full price involved in this operation was 2.07 trillion pesetas.

Quarterly financial expenses were similar to those for the first quarter of 1999, at 14,546 million pesetas. Net debt at June 30^th, 1999 was 3,739,409 million pesetas, and this implies a debt to capitalisation ratio of 72.7% at that date. Following the capital increase in July, this ratio adjusted to 54.5%.

1.3.1 – Acquisition – Public Tender Offer

• The Public Tender Offer on YPF shares opened on April 30^th, and closed on June 23^rd last. During this operation, Repsol acquired, and now owns, 344,027,139 shares and ADSs, or 97.46% of YPF ordinary stock. The overall cost of the operation, including the disbursement made in January for a 14.99% stake in the company, was 14,855 million dollars.

We wish to point out that, from June 23^rd last, YPF financial statements globally consolidate in the financial statements of Repsol.

 

1.3.2 – Financing of YPF Acquisition

Capital Increase

• The Extraordinary General Meeting of Shareholders, held on June 5th 1999, approved a capital increase of 240 million shares, with an over-allotment option of a further 48 million shares, exercisable at the discretion of the underwriters of the offering, waiving pre-emptive subscription rights, but with priority for the shareholders in the share allotment.
• From June 21^st to July 2nd last, for the first time in Spain, Repsol conducted a capital increase via Public Share Offering.
• The operation was the largest capital increase ever by an oil company on a world scale, and Repsol obtained an overall sum of 942,648 million pesetas (5,655 million euros). Subscription applications were received for an overall amount of 3 billion pesetas, or 3.7 times the offering.

The sub-tranche for Repsol employees received a remarkable response, with a demand for over 66 billion pesetas, 1.7 times the shares offered. Approximately one of every two Repsol employees purchased shares in the company.

After exercising the over-allotment option on July 19th, through which a further 48 million shares were subscribed, Repsol’s ordinary stock now comprises 1,188,000 million shares with a nominal value of 1 euro each.

Bond issues

• On May 19^th last, Repsol issued, through its affiliate Repsol International Finance (RIF), floating rate notes at 18 months and a variable Euribor interest rate plus 15 basis points, for an overall amount of 3,250 million euros.
• On June 10^th, also through its affiliate Repsol International Finance, Repsol launched a Eurobond issue at three years for an amount of 1 billion euros. These bonds have a coupon of 3.5% per year, and an effective cost of 3.69%.
• With these two operations, and that for 1.4 billion euros at 5 years, carried out in February of this year, Repsol has issued 5,650 million euros on the Euromarket this year.

1.3.3 – Corporate Restructuring

• As part of the integration process within the new Repsol-YPF Group and in order to improve management efficiency, on July 6^th last, the Repsol, S.A. Board of Directors passed the following resolutions:

• To give the company the new name of Repsol-YPF. This change of company name must be approved at the General Shareholders’ Meeting.
• The creation of an Integration Committee to monitor the process of unifying both companies. The Co-ordinator of this Committee is Ram�n Blanco Bal�n, Board Member of Repsol and YPF, and Chairman of the Auditing Committee to the Repsol Board of Directors. Roberto Monti, Miguel Angel Rem�n and Juan Sancho Rof, are also members of this Integration Committee.
• To set up a new fully integrated corporate structure on a world scale, with a single corporate decision-making centre and two head offices, in Madrid and Buenos Aires.
• To appoint five Vice-Presidents, directly responsible to the Chairman and CEO. These are as follows:
• Chairman and CEO: Alfonso Cortina.
• Senior Vice-President for Planning, Control and Strategic Development: Miguel Angel Rem�n
• Executive Vice-President for Exploration and Production: Roberto Monti
• Executive Vice-President for Refining and Marketing: Juan Sancho Rof
• Executive Vice-President for Chemicals: Antonio Gonz�lez-Adalid.
• Executive Vice-President for Gas and Electricity: Guzm�n Solana
• Additionally, the Repsol, S.A. Board of Directors and the Repsol-YPF Executive Committee, at the meetings held on July 28^th, made several resolutions relating to the new Repsol-YPF Group structure. Following these meetings, the Repsol-YPF Executive Committee is comprised of the following members:

• Alfonso Cortina, Chairman and CEO
• Miguel Angel Rem�n
• Roberto Monti
• Juan Sancho
• Antonio Gonz�lez-Adalid
• Guzm�n solana
• Jes�s Fern�ndez de la Vega
• Carmelo de las Morenas
• Jos� Manuel Revuelta, who will act as Secretary to the Committee.

One of the main goals in designing the new structure was to identify those who, in terms of professional experience and technical skill, were most suited to occupy positions of management responsibility in each business area. The company members thus appointed came from YPF, Repsol, S.A., or affiliate companies. With these appointments, the first line of management for the new Repsol-YPF Group has been established, and this signifies a substantial progress within a very short space of time in the process to integrate the assets and human resources of both companies.

• Changes in the legal framework for the gas sector: Royal Decree Law 6/1999 passed on April 16^th of this year amended the Law on Hydrocarbons 34/1998 in the following aspects, among others:
• Up-dating of parameters for the maximum price system governing supplies of natural gas for industrial uses, leading to a fall of 3.8% in the average industrial tariff.
• New tariffs were set for the residential commercial sector of natural gas. Here the average tariff fell 2.2%.
• A change was made in the "marketing cost" factor in the maximum price formula for LPG in bottles of more than 8 kilos, lowering the price 1.4%.
• The exclusivity period for distributors authorised under the Law on Hydrocarbons was reduced from 15 to 10 years.
• The process to liberalise the natural gas sector in Spain was accelerated, and full liberalisation of supplies was fixed at January 1^st, 2008 instead of 2013 as previously stipulated.
• On July 15^th, Repsol announced a new oil discovery in the Mediterranean Sea, 30 kilometres offshore from Tarragona, near the Casablanca oil rig. The Casablanca oil complex currently produces 6,500 barrels per day from the Casablanca, Rodaballo and Boquer�n fields. New production from the Chipir�n field will make it possible to at least double Spanish crude oil production from the Mediterranean Sea. It is estimated that the development project will last some 20 months, and production is therefore scheduled to start at the beginning of 2001.
• Effective as of May 31^st last, Repsol sold its 50% stake in Gas Natural Mexico to Gas Natural SDG, who already owned the other 50%. The price of this sale was 9,149 million pesetas, and 1,945 million pesetas of capital gain was generated for Repsol-YPF.
• On July 21^st, Repsol-YPF started its gas production in the Salam gas plant in the Khalda concession, located in the Western Desert of Egypt. The Khalda Concession Contractor Parties: Repsol-YPF, Operator (50%), Apache (40%) and Novus (10%) invested US$ 300 million to develop the gas reserves in this concession discovered during the last six years. With this project the total production of Khalda Concession will increase from 37,000 Boe per day to more than 100,000 Boe per day. Repsol-YPF, with a net production of approximately 45,000 barrels per day, is the third hydrocarbon producer in Egypt.
• In Algeria, development of the gas cap at the Tim-Fouye Tabankort (TFT) field was completed with the start-up of the second treatment train, with a nominal capacity of 8 million Nm3 per day. Production is currently at a nominal capacity of 15.4 million m3 per day, with the possibility of reaching 20 million m3 per day.

The TFT field, located in the South-East of Algeria, about 1,200 km from Algiers, went on stream at the end of March, 1999, at a rate of 5 million m3 per day of gas, and production has increased gradually to its present level. The operating company is formed by Repsol, Total and Sonatrach, operated by Total, bound by a Production Sharing Contract with a duration of 20 years.

• On July 22^nd last, Repsol-YPF and BP Amoco announced the execution of two agreements relating to the strategic alliance between the two companies. The first is the completion of commercial arrangements for the acquisition of up to 5 billion cubic metres (5 bcm) per year of liquefied natural gas from Trinidad and Tobago for the Spanish market. In addition, the two companies executed a joint co-operation agreement which will be complemented with the initiatives underway with Iberdrola, setting forth the basis for the development of new gas fired power projects in Spain.
• On July 27^th, Repsol-YPF, through its affiliate Repsol Qu�mica, signed with the Mexican company GIRSA, an affiliate of DESC, S.A. de C.V., the Final Agreements corresponding to its 50/50 alliance in the solution synthetic rubber business. This agreement was mentioned in our first quarter 1999 preview of income statement.

2.- ANALYSIS OF RESULTS BY ACTIVITIES

2.1.-  Exploration and production

2^nd quarter results

Operating income for this activity in the second quarter of 1999 was 10,985 million pesetas, in comparison to 5,233 million pesetas for the same quarter a year earlier, and 1,759 million pesetas in the first quarter of this year.

The contribution of YPF exploration and production assets (equivalent to 8 days only) and Astra to operating income during this second quarter was 3,597 and 4,499 million pesetas respectively.

This improved performance was the result of higher oil prices (the average price of Brent crude throughout the quarter rose to $15.48 per barrel, and was $15.82 per barrel in June, as opposed to $13.31 per barrel a year earlier).

Repsol’s net production for the second quarter of 1999 was higher than 31 million Boe. Production in Latin America was over 13.8 million Boe. YPF production (for the last 8 days of June) was 6.7 million barrels.

1st half results

Accumulated operating income for first half 1999 was 6% higher than in 1998, at 12,744 million pesetas.

Results were boosted by a continuous rise in oil prices, which reached their highest level for the past two years. The average price of Brent crude so far this year was $13.38 per barrel in comparison with $13.68 per barrel a year earlier, although oil prices reached their lowest in recent years during the first quarter 1999.

Apart from the above, production rose 22.7%. Thus, Repsol’s net production for the first half of 1999 was 54.05 million barrels of oil equivalent (7.51 million tons of oil equivalent), including YPF production for the last 8 days of June.

Investments

1.55 trillion pesetas were invested during the second quarter of 1999, mainly attributable to acquisition of the Exploration and Production part of YPF.

Overall investment during the first half of the year was 1.8 trillion pesetas, of which 97% was spent on the YPF deal.

2nd quarter results

At 30,207 million pesetas, 1999 second quarter operating income was 11.3% down on first quarter 1999 figures, and 23.3% lower than year earlier figures.

Income from this area in Spain suffered from very low international refining margins, particularly in Europe. This negative effect was partially offset by a higher peseta/dollar exchange rate.

Repsol’s refining margin indicator in Spain fell 53% in comparison to the second quarter 1998, and 19.8% in comparison to the first quarter of this year. Second quarter year-on-year distillation levels in Spain fell 8%, and 8.4 million Mt were processed. This was because, on occasions, the low "topping" margin made it advisable to reduce exports.

In marketing, gasoline, gas-oil and aviation kerosene sales rose 0.9% in Spain, excluding sales to other operators.

Turning to the logistics activity conducted by CLH, this despatched 4.0% more products than in the same quarter of 1998.

Refining margins in Peru were low this quarter, nearing the level of $1.2 per barrel. Distillation was at 52% of nominal capacity. Second quarter operating income from the La Pampilla refinery was 2,039 million pesetas.

Eg3 obtained 1,414 million pesetas in operating income, showing a year-on-year drop of 35% as a result of low refining and marketing margins and a fall in demand for oil products in Argentina. Distillation levels at the Bah�a Blanca refinery kept slightly below nominal capacity and margins remained at around $2 per barrel.

Finally, YPF refining and marketing operations added 763 million pesetas to operating results.

First half results

Refining and Marketing operating results for the first half of 1999 were 9.8% down on year earlier levels, at 64,266 million pesetas. This lower performance was mainly due to a fall in international refining margins.

17.7 million tons of oil products were distilled at Repsol refineries in Spain, with a utilisation rate of 95.5% (1% lower than in the first half of last year). Average margins at the Group’s Spanish refineries were 46% below those for the first six months of 1998.

CLH transported 7.7% more product over the period than in 1998, although gasoline fell 1.4%.

In marketing, first half 1999 sales of gasoline, gas-oil and aviation products to the domestic market (excluding sales to other operators) rose 2.7% in comparison to the same period a year earlier.

Operating income from Latin America was 6,909 million pesetas, showing a decrease of 27% over the same period of 1998. Here, results suffered because of lower refining and marketing margins, and the crisis in Latin America, which reduced turnover.

Investments

Second quarter investment in refining and marketing was 495,149 million pesetas. Of this, 463,608 million pesetas was used for the acquisition of YPF Refining and Marketing assets.

Investments for the first half of 1999 were 589,900 million pesetas.

2.3.- Chemicals

2^nd quarter results

Operating income from chemicals for the second quarter of this year was 2,613 million pesetas, showing a fall of 66% against that for the same period in 1998, and 25% against the first quarter 1999.

This lower performance was the outcome of a sudden narrowing of international margins on base chemicals, caused by a sharp rise in the price of naphtha. This negative factor was partially offset by a 28% rise in sales, and a slight improvement in derivative chemical margins.

YPF sales (attributable to 8 days) made up 5% of total sales during the second quarter.

This drop in income when compared with the same period of last year was, as we have already mentioned, the result of a cut in margins on base chemicals, together with a 7% narrowing of derivative chemical margins. Sales on base and derivative chemicals rose 25%.

1^st half results

Cumulative income for the first half was 6,104 million pesetas, in contrast to 17,559 million pesetas in 1998, showing a year-on-year fall of 65%. The low base chemical margins mentioned previously were responsible for these poorer figures, whereas the ethylene/naphtha differential over the six-month period actually fell 28%. Derivative chemical margins were also 8% down.

On the positive side, sales showed a strong 17% growth.

Investments

50,481 million pesetas were invested in chemicals during the second quarter of 1999, in comparison to 5,083 million pesetas for the same quarter a year earlier.

Accumulated capital expenditure for the first half of 1999 was 57,435 million pesetas against 9,990 million pesetas in 1998. In addition to outlay for the acquisition of YPF chemical assets, the main investment this period was the propylene oxide/styrene project currently underway at Tarragona, and due to go on stream at the beginning of next year.

Second quarter results

Operating income from Repsol’s gas and electricity activities posted a 43.4% rise over the same period of 1998, reaching 20,457 million pesetas.

Second quarter income from natural gas and electricity was 76.4% up, at 15,458 million pesetas, mainly as a result of 50.4% higher sales.

The Gas Natural Group sold 8,765 million thermies to the residential and commercial sector, with an 11.3% rise over 1998 second quarter figures. This sales improvement came from an increase in the customer list in Spain and Latin America. The Gas Natural Group distributes gas to over 5,105,000 residential and commercial customers, showing an increase of 594,000 customers over the past twelve months, 246,000 of these in Spain, 199,000 in Gas Natural Mexico, 59,000 in Argentina, and the remainder in Colombia and Brazil.

29,207 million thermies were consumed by the industrial sector during the period, 14.4% up on year earlier figures. Here, better performance was attributable to general improvement in Spain’s economic situation and marketing expansion in the areas covered by the Gas Natural Group.

In Latin America, natural gas and electricity contributed 5,025 million pesetas over the second quarter of 1999, 117% more than the same period in 1998. Quarterly income here was boosted by the consolidation of 45.3% of GASA, which has consolidated since July 1^st 1998, and the growth of demand from other distributors in the region.

With the consolidation of GASA, Astra sold 2,523 million thermies to the residential and commercial sector, and 4,025 million thermies to the industrial and power station sectors.

Power generation produced 832 GWh during this second quarter, which was 5% less than in 1998, mainly because of problems in the Tucum�n Power Station transformer. 7.9% more electricity (2,745 GWh) was distributed.

Second quarter LPG operating income was 9.2% down on year earlier figures, at 4,999 million pesetas. This was mainly due to lower sales in Spain, which higher sales abroad did not succeed in compensating.

658,000 tons of LPG were sold in the second quarter of 1999, and this was 6% more than in the same period a year earlier. Here, there was a 110% increase in sales outside Spain, with a volume of 168,000 tons. These good figures contrasted with a 9.4% fall in LPG sales in Spain which, at 490,000 tons, were affected by warmer weather.

LPG performance in Latin America improved by 64 million pesetas in comparison to the same period a year earlier.

1^st half results

Repsol posted a first half operating income from the gas and electricity sector of 52,114 million pesetas, in comparison to 37,530 million pesetas a year earlier.

Of this, 5,696 million pesetas came from Latin America, which was 122.8% more than in 1998. This growth was mainly due to the incorporation of GASA and the growth of markets in which the company was already present.

Investments

Second quarter investments amounted to 42,477 million pesetas in LPG, and 17,910 million pesetas in natural gas and electricity.

Accumulated first half expenditure in gas and electricity was 87,364 million pesetas, mainly for the development of LPG marketing activity in Spain and Latin America, the expansion of infrastructure for the transmission and distribution of natural gas, and projects to integrate the gas-electricity chain. 44,930 million pesetas were applied to the acquisition of YPF.

3.- FINANCIAL RESULT

Net financial expenses for the second quarter of 1999 were 14,546 million pesetas, and this is a similar figure to that registered for the first quarter of 1999.

Net financial expenses for the first half were 28,842 million pesetas. This was 16,528 million pesetas higher than those for the same period of 1998, and shows the impact of financing taken up for the acquisition of the 14.99% stake in YPF made last February.

This financial result does not yet include the effect of increased financial debt relating to acquisition of a further 82.5% of YPF at the end of June, or the financial costs associated with YPF debt, which began to integrate via global consolidation on June 23^rd last.

Net financial debt rose from 568,644 million pesetas at December 31^st, 1998 to 3,739,409 million pesetas at June 30^th, 1999. This figure includes financing taken up for the acquisition of YPF and the latter’s overall financial debt which, at June 30^th, was 629,760 million pesetas.

Following the capital increase carried out by Repsol in July, financial debt was reduced to 2,818,019 million pesetas, resulting in a 54.5% debt to capitalisation ratio.

4.- EQUITY ON EARNINGS OF UNCONSOLIDATED AFFILIATES

Net income from unconsolidated affiliates this quarter was 3,642 million pesetas, as opposed to 974 million pesetas in 1998. This large difference mainly came from the 14.99% of YPF net income entered for the whole of the quarter, with the exception of the last eight days when it consolidated globally.

5.- GOODWILL AMORTIZATION

Goodwill amortisation for the second quarter of 1999 was 2,951 million pesetas, in comparison to 1,728 million pesetas a year earlier.

This increase basically came from goodwill amortisation generated by the acquisition of YPF, and adjusted following consolidation of the majority stake.

6.- EXTRAORDINARY ITEMS

There was a net extraordinary loss of 24,288 million pesetas in the second quarter 1999. This figure was mainly the result of 27,103 million pesetas in costs associated with the YPF deal, mentioned at the beginning of this report. Additionally, 6,200 million pesetas were set aside for manpower restructuring programmes. These high expenses were partially offset by 9,984 million pesetas of capital gains on asset divestment, including the sale of CLH central offices for 9.3 billion pesetas and our stake in Gas Natural Mexico, as mentioned earlier, for 9.149 billion pesetas.

7.- MINORITY INTERESTS

Income attributable to minority shareholders for the second quarter of 1999 was 8,031 million pesetas, in comparison to 6,432 million pesetas in 1998, and 3,817 million pesetas for the first quarter of this year. Increase over the first quarter was produced by higher income, mainly from CLH (1,706 million pesetas), Astra (850 million pesetas), GASA (599 million pesetas) and Invergas (522 million pesetas).

8.- TAXES

The tax rate for the second quarter of 1999 was 32.7%. The tax rate for the first half reached 31.1% in comparison to 30.7% for the same period in 1998.

REPSOL SUMMARISED INCOME STATEMENT

(Million pesetas)

(Non-audited figures)

^{(1) Calculated on 900 million shares resulting from share split of April 1999
____________________________
$ = 153.48 pesetas in 2Q98
$ = 155,066 pesetas in 1Q99
$ = 161.196 pesetas in 2Q99}

BREAK-DOWN OF REPSOL OPERATING INCOME BY ACTIVITY

(Million pesetas)

(Non-audited figures)

_____________________________________________________________________
(1) Includes Repsol Exploraci�n, Astra exploration activity and since June 23rd, 1999, YPF exploration activity.
(2) Includes C.L.H. refining & marketing of Repsol Petr�leo, Petronor, Repsol Comercial de Productos Petrol�feros,Refiner�a La Pampilla and Eg3. From June 23rd, 1999, includes YPF refining and marketing activity.
(3) Includes basic petrochemicals from Repsol Petr�leo and Petronor plus derivative petrochemicals from Repsol Qu�mica.
(4) Includes Repsol Butano, Solgas, the 45.3% stake in the Gas Natural Group, and Astra's electricity activities.
(5) Mainly includes Repsol S.A. overheads.

BREAK-DOWN OF REPSOL OPERATING CASH-FLOW BY ACTIVITY

(Million pesetas)

(Non-audited figures)

_____________________________________________________________________
(1) Includes Repsol Exploraci�n, Astra exploration activity and since June 23rd, 1999, YPF exploration activity.
(2) Includes C.L.H. refining & marketing of Repsol Petr�leo, Petronor, Repsol Comercial de Productos Petrol�feros,Refiner�a La Pampilla and Eg3. From June 23rd, 1999, includes YPF refining and marketing activity.
(3) Includes basic petrochemicals from Repsol Petr�leo and Petronor plus derivative petrochemicals from Repsol Qu�mica.
(4) Includes Repsol Butano, Solgas, the 45.3% stake in the Gas Natural Group, and Astra's electricity activities.
(5) Mainly includes Repsol S.A. overheads.

BREAK-DOWN OF REPSOL OPERATING INCOME BY ACTIVITIES AND GEOGRAPHICAL AREAS

(Million pesetas)

(Non-audited figures)

BREAK-DOWN OF REPSOL OPERATING REVENUES BY ACTIVITY

(Million pesetas)

(Non-audited figures)

________________________________________________________
(1) Includes Repsol Exploraci�n, Astra exploration activity and since June 23rd, 1999, YPF exploration activity.
(2) Includes C.L.H. refining & marketing of Repsol Petr�leo, Petronor, Repsol Comercial de Productos Petrol�feros, Refiner�a La Pampilla and Eg3. From June 23rd, 1999, includes YPF refining and marketing activity.
(3) Includes basic petrochemicals from Repsol Petr�leo and Petronor plus derivative petrochemicals from Repsol Qu�mica.
(4) Includes Repsol Butano, Solgas, the 45.3% stake in the Gas Natural Group, and Astra's electricity activities.
(5) Mainly includes Repsol S.A. overheads.

BREAK-DOWN OF INVESTMENTS BY ACTIVITY

(Million pesetas)

(Non-audited figures)

________________________________________________________
(1) Includes Repsol Exploraci�n, Astra exploration activity and since June 23rd, 1999, YPF exploration activity.
(2) Includes C.L.H. refining & marketing of Repsol Petr�leo, Petronor, Repsol Comercial de Productos Petrol�feros, Refiner�a La Pampilla and Eg3. From June 23rd, 1999, includes YPF refining and marketing activity.
(3) Includes basic petrochemicals from Repsol Petr�leo and Petronor plus derivative petrochemicals from Repsol Qu�mica.
(4) Includes Repsol Butano, Solgas, the 45.3% stake in the Gas Natural Group, and Astra's electricity activities.
(5) Mainly includes Repsol S.A. overheads.

REPSOL COMPARATIVE BALANCE SHEET

(Million pesetas)

(Non-audited figures) 

REPSOL CONSOLIDATED STATEMENTS OF CASH-FLOWS

JANUARY-JUNE - 1998 AND 1999

(Million pesetas)

(Non-audited figures)

OPERATING HIGHLIGHTS

* All figures in barrels are obtained by applying a fixed ratio of 1 ton = 7.3 barrels

(*) All figures include YPF consolidation since June 23rd, 1999
(1) Figures for net production
(2) From September 1st, 1997, includes 100% of Eg3
(3) No sales were made to CORES during the first half.
(4) From January 1st, 1998, includes 100% of Repsol Ecuador.
(5) Includes net sales of base chemicals.
(6) From June 1st, 1997, includes 100% of ALGAS sales in Argentina.
(7) Includes Repsol Butano sales for export (France and Portugal) and Trading; from September 1st, 1998, 100% of DURAGAS sales in Ecuador, and from August 1st, 1998, 100% of National Gaz sales in Morocco.
(8) Comprises proportional consolidation of Gas Natural Group sales (45.3%), and includes global consolidation in the Natural Gas Group of ENAGAS sales.
(9) Includes proportional consolidation of 45.3% of Gas Natural BAN sales, and from July 1998, 45.3% of Metrogas sales in Argentina.
(10) Includes proportional consolidation of 72.6% of sales in Mexico up to May 31st, and 45.3% from that date onwards, 19.3% of Gas Natural ESP (Colombia) sales, 8.6% of CEG sales, and 11.4% of Riogas sales in Brazil.