REPSOL announced today its decision to launch a cash tender offer for all the outstanding shares and ADSs that it does not already own of YPF (85.01%), the largest publicly-owned oil and gas company in Latin America, for US$44.78 per share/ADS. Such price per share would imply a total cash consideration of US$13,438 million (Ptas 2.11 trillion), should all the shares be tendered pursuant to the offer. The price represents a 25.4% premium over today�s closing price at the Buenos Aires Stock Exchange. The tender offer will be filed with the Argentine Comisi�n Nacional de Valores and the US Securities and Exchange Commission, and is expected expire on June 23rd,1999.

The tender offer is structured as joint tender offers at the same price in Argentina and the United States and is conditional, among others, on the number of shares and ADSs validly tendered and not withdrawn in each offer, together with the shares already held by Repsol, exceeding an absolute majority of the outstanding YPF shares.

Mr. Alfonso Cortina, Chairman and CEO of Repsol, was quoted as saying: "This exciting opportunity represents a quantum leap for our company. This is a transaction focused on growth which dramatically advances our strategy in a single step. In addition, we know that we have the support of our principal shareholders, both for the initial financing and for the refinancing plan".

Repsol has chosen to launch a cash tender offer as the quickest and most effective way to proceed with the transaction in compliance with the by-laws of YPF. The transaction requires Repsol to raise substantial debt financing, but the strong combined cash flow of Repsol and YPF, and a refinancing plan to be executed in the near term should allow Repsol to maintain a strong investment grade rating.

This transaction offers significant opportunities for value creation, given the growth potential and the highly complementary assets and skills. The acquisition represents a significant step towards Repsol�s four main strategic objectives:

1. Growth in Exploration & Production through the addition of YPF�s outstanding upstream business;
2. Growth in Latin America, where most of YPF�operations are based;
3. Better integration along the gas value chain, particularly with the combination of REPSOL�s and YPF�s positions to develop the potentially high growth Brazilian gas market;
4. Maintenance of leadership positions in domestic markets in Spain, and now, Argentina.

"A strong effort will be made to rapidly and effectively optimise the integration of the two companies, while retaining the best people in both organisations, and ensuring that the new entity builds on the relative strengths and expertise of each" Cortina said.

There is a superb fit between the assets and skills of both companies and it will be exciting to build a world-class integrated oil and gas company leveraging the leading position of each company in its own domestic market. The improved balance between upstream and downstream, the advantages of vertical integration in natural gas and LPG, and realisation of operating and investment synergies, together is expected to lead to value creation through improved earnings balance and faster earnings growth.

Cortina emphasised the growth nature of the deal, "The focus of our transaction is growth: growth in exploration and production; growth in natural gas and LPG; growth in refining and marketing; and exploitation of high growth markets in Latin America". To ensure the benefits of the transaction can be reaped quickly and effectively, Repsol intends to pursue a clear strategy including the following:

1. Focus exploration and production on the highest return projects.
2. Exploit the unique fit between both companies in natural gas and LPG in Latin America.
3. Optimise and grow the strong combined position in Latin American Refining and Marketing in the high growth markets of the region.
4. Ensure that the outstanding growth potential of the combined companies is firmly underpinned by operating and financial efficiency.

In the area of Exploration and Production, the new Group will focus its activity on the highest return projects and concentrate on the two core regions of Latin America and North Africa, and pursue assets divestitures outside the core regions. At the end of 1998, the combined business would have had total reserves of 4,226 million boe and daily production in excess of one million boe. "Our exploration program will be rationalised, and focused on the most attractive projects from a return perspective from the enlarged combined portfolio. We will structure our operations such that they remain profitable down to a break-even oil price of US$7 bbl. Going forward we target annual production growth in excess of 5% until 2002".

In Natural Gas and LPG, REPSOL will exploit the unique fit of the two companies in Latin America. "The powerful combination of REPSOL�s Atlantic LNG project and interests in Brazilian gas distribution infrastructure coupled with YPF� gas reserves will give us a unique ability to gain early access to opportunities in natural gas and LPG in the region. We will also realise substantial benefits from the application of REPSOL�s high productivity standards to the integrated Latin American operation. In Latin America we target more than 24% p.a. growth in LPG sales, and double-digit growth in natural gas sales, both until the year 2002".

In Refining & Marketing, there is a striking similarity in the position of Repsol and YPF in their respective domestic markets. Both are regional leaders in refining with impressive portfolios of infrastructure and with a national service station network second to none. "Our opportunity now is to apply Repsol�s track record of efficiency improvements to the business in Latin America and to use the current position as a platform for growth. In Latin America we will focus our effort on the YPF brand, while the Repsol brand will be used in the rest of the world. In Argentina and Peru, where both downstream operations overlap, duplications will be eliminated and logistics integrated. Our existing Latin American operations will become a platform to access growth opportunities in Brazil and Colombia. For the region as a whole, we target a 50% increase in the number of service station outlets by the year 2002" said Cortina.

Value will also be created by maximising operating and financial efficiency; focus on operating costs, application of best practises, organisational efficiencies and joint marketing. In addition, proceeds of up to $2.5 billion (approximately 350,000 million pesetas) for debt repayment will be sought through sales of non-core assets. The transaction will also allow the combined group save or avoid capital expenditures of $2 billion ( 300,000 million pesetas) in exploration and production and refining and marketing, originally planned for 1999 to 2002.

The acquisition of YPF requires Repsol to raise substantial acquisition financing. The initial financing for the transaction consists of up to a US$15,500 million (2.4 trillion pesetas) of senior unsecured floating rate credit facility underwritten by a syndicate of banks consisting of BBV, Goldman Sachs, "La Caixa", Merrill Lynch, CitiGroup and UBS. This will result in a short-term increase in leverage, which REPSOL is committed to managing and reducing within the next months in order to maintain a good level of debt rating. To this effect Repsol expects to raise up to $ 6 billion (900 billion pesetas) in equity and equity-linked securities. In addition to the significant cash flow generation of the combined business, Repsol is expected to raise approximately $2.5 billion (375,000 million pesetas) through the disposal of non-core assets and save approximately $ 2.0 billion (300,000 million pesetas) of capital expenditures during the period 1999 to 2002.

Repsol expects to reduce the total debt to total capitalisation ratio from around 70% (pro-forma 1998 year end) to around 50% by year end 2000.

In addition, the combination will provide the basis for improved financial performance targets.

REPSOL is being advised by Goldman Sachs, Merrill Lynch and Salomon Smith Barney in this transaction.

ANNEX 1: Description of Repsol

ANNEX 2: Description of YPF

• Jos� M� Garc�a-Perrote
• 54-11-4-342.80.10

NOTE

On Friday, April 30th, a press conference at Repsol headquarters in Madrid at 11.00h will be held to explain the above operation by Repsol�s Chairman and CEO Alfonso Cortina

REPSOL

Repsol�s activities are organised into four business segments: Exploration and Production, Refining and Marketing, Chemicals and Gas.

Exploration and production

Repsol�s oil reserves are located principally in North Africa, the Middle East and Latin America, with additional reserves located in the North Sea (United Kingdom), Indonesia, West Africa and Spain. As of December 31, 1998 Repsol had proved reserves of 978 million barrels of oil equivalent (boe) (66% oil, 34% gas), producing during 1998 248,000 boe per day. Exploration and production activities reported in 1998 sales of Pta 160.4bn (US$1,128 million) with an operating income of Pta 15.4bn (US$108 million).

Refining and marketing

Repsol conducts refining activities in four countries, and holds the leading position in the Spanish market. It operates five refineries in Spain with an aggregate installed capacity of 740,000 barrels per day (representing 59% of Spain�s installed refining capacity) and two refineries in Latin America (Argentina and Peru) with an aggregate installed capacity of 132,500 barrels per day.

Repsol conducts marketing and distribution activities in six countries, it is the number one in the Spanish market and is a leading competitor in Argentina, Peru and Ecuador. Repsol has a network of 3,495 service stations and gas pumps in Spain, and networks aggregating 1,194 service stations and pumps outside Spain, mainly in Latin America.

REPSOL holds a 60% stake in CLH, the largest logistics company of oil products in Spain, with 3,413km of pipeline, 9 shipping tankers and 200 tanker lorries.

Operating income for the Refining, Marketing and Distribution unit for 1998 was of Pta155.2 bn (US$1,092 million) with revenues of Pta2.4 trillion (US$17,216 million)

Chemicals

Repsol is the market leader in Spain for basic and derivative petrochemical products, polymers, intermediate products and rubber, with more than 50% of the Spanish production capacity for most of the products. REPSOL manufactures polymers, intermediate products, specialty chemicals and plastics. The division reported in 1998 operating profit of Pta29.4bn (US$207 million) and revenues of Pta185.4bn (1,304 M $).

Gas and electricity

Gas operations include the distribution and sale of LPG and of natural gas. Repsol�s LPG marketing activities are carried out by Repsol Butano, S.A, the largest wholesaler and retailer of LPG in Spain in terms of both revenues and volume, and the largest distributor of bottled LPG in Europe. Repsol also markets and distributes LPG in six countries outside Spain and is a leading competitor in Peru, Argentina and Ecuador.

Repsol�s domestic natural gas distribution activities are conducted through its 45.3% subsidiary Gas Natural SDG. Gas Natural holds the leading position in the Spanish natural gas market, selling 508 bn standard cubic feet (SCF) of natural gas to approximately 3.0 million customers in 1998. Repsol is a leading competitor in Colombia, Brazil, Argentina and Mexico. The company has recently enered into the electricity generation business, operating generation facilities which are integrated with its natural gas reserves in Argentina and plans to do so in Spain.

Gas and electricity activities reported revenues of Pta430.2bn (US$ 3,027 million) and operating income of Pta77.9bn (US$548 million) for 1998.

FINANCIAL HIGHLIGHTS

(December 31st, 1998)

(Million US $)

(December 31st, 1998)