1. First half results

   1.1. Write-off of expenses associated with the acquisition of YPF

   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 Amortisation", Repsol-YPF decided to write off these costs during this financial year in order to optimise its financial-tax recovery.

   The amount to be written off 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 is in line with best financial and accounting practice and gives highest return to the shareholder by obtaining immediate tax reduction on the aforementioned expenses.

   2. Results

Repsol�s net income for the first half of 1999 was 47,225 million pesetas. Operating income was 133,589 million pesetas.

These income figures 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.

By areas of activity, these are the highlights for the first half 1999:

In Exploration and Production, operating income rose 6% over year earlier figures, to 12,744 million pesetas. Results were boosted by a continuous rise in oil prices, which reached their highest level for the past two years. Another favourable factor was a 22.7% rise in net hydrocarbon production, reaching 54.05 million barrels of oil equivalent.

First half 1999 operating income for last year from the Refining and Marketing area was 9.8% down on the same period last year, at 64,266 million pesetas. This lower performance was mainly due to a narrowing of international refining margins.

At 6,104 million pesetas, operating income from Chemicals was 65% down on the 17,559 million pesetas obtained in the first half of 1998. This fall may be explained by lower international margins on base and derivative chemicals. Sales, however, rose by 17%.

In Gas and Electricity, accumulated operating income showed an improvement of 38.8%, reaching 52,114 million pesetas in comparison to 37,530 million pesetas a year earlier. In LPG, sales outside Spain increased, whereas they fell slightly on the domestic market because of warmer weather. In natural gas, sales were higher in Spain and Latin America.

Investments made by Repsol-YPF over the first half 1999 amounted to 2.5 trillion pesetas, of which approximately 2.36 trillion were spent on acquiring 97.46% of YPF.

Net financial debt at June 30th, 1999 was 3.7 trillion pesetas, implying a debt to capitalisation ratio of 72.7% at that date. Following the capital increase carried out by Repsol in July, this ratio was reduced to 54.5%.

2.1 � Acquisition � Public Tender Offer

• The Public Tender Offer on YPF shares closed on June 23rd last. Following this operation, Repsol now owns 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.

2.2 � 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 (green-shoe).

The operation, which took place between June 21st and July 2nd last, 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 trillion 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.

5,650 million euros issued on the Euromarket

• 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.

2.3 � 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.
• 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.

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. After these meetings, the new Repsol-YPF Executive Committee was appointed.

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.

• In July, Repsol-YPF made a new oil discovery in the Mediterranean Sea. Production from the new field, named Chipir�n, is scheduled to start at the beginning of 2001, and will make it possible to at least double Spanish crude oil production from the Mediterranean Sea, reaching a figure of over 13,000 barrels per day.
• 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%. On this operation, 1,945 million pesetas of extraordinary 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. This will increase the total production of Khalda Concession from 37,000 Boe per day to more than 100,000 Boe per day.
• In Algeria, the second treatment train went into operation at the Tim-Fouye Tabankort (TFT) field. Production is currently at a nominal capacity of 15.4 million m3 per day, with the possibility of reaching 20 million m3 per day. Production at this field began at the end of March, 1999, at a rate of 5 million m3 per day, and has increased gradually to its current level.
• On July 22^nd last, Repsol-YPF and BP Amoco completed 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 signed with the Mexican company GIRSA the final agreements corresponding to its 50/50 alliance in the solution synthetic rubber business.

REPSOL SUMMARISED INCOME STATEMENT

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REPSOL COMPARATIVE BALANCE SHEET

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REPSOL SUMMARISED INCOME STATEMENT

(Million Euros)

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REPSOL COMPARATIVE BALANCE SHEET

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(Unaudited figures)