REPSOL REPORTS NET INCOME OF 145,515 MILLION PESETAS (US$ 1,023 million)

Repsol�s net income for the financial year of 1998 was 145,515 million pesetas, (US$1,023 million), which was 15.4% higher than the 126,098 million pesetas obtained in 1997. Operating income, at 275,844 million pesetas (US$1,900 million) showed a rise of 18% on the previous year�s performance, and cash-flow was 9.1% up on 1997, at 357,721 million pesetas (US$2,516 million).

This good performance shows the strength of the company�s business portfolio and the growing balance of its fund generating structure against an international scenario of low oil prices, economic crisis in developing countries, and refining margins which remained higher than those of 1997.

By areas of activity, these are the highlights for the 1998 financial year:

In Exploration and Production, operating income fell by 66.1% over year earlier figures, to 15,404 million pesetas. This drop was basically due to worsening oil prices, which dropped to the lowest levels for this decade. The average price of Brent crude in 1998 was $12.74 per barrel, in contrast to $19.09 per barrel in 1997. The effect of these low oil prices was partially counteracted by a higher USA dollar/peseta exchange rate, and by an increase in production. Net production of hydrocarbons for the whole year was 89.88 million barrels of oil equivalent (12.52 million tonnes of oil equivalent), showing a rise of 8% over 1997.

Operating income for last year from the Refining and Marketing area was 40% up over 1997, at a record 155,186 million pesetas. This improvement may basically be attributed to higher refining margins, increased sales and good marketing margins, accompanied by a larger contribution from activities in Latin America.

Operating income from Chemicals was 3.7% up on the previous year, at 29,440 million pesetas. This was achieved despite difficult conditions for international markets. Sales of base chemicals rose by 6.5%, and sales of derivative products showed a specially high rise of 17.1% in comparison to 1997 figures.

In Gas and Electricity, 1998 operating income showed an improvement of 54.8% over the preceding year, reaching 77,896 million pesetas, in comparison to 50,321 million pesetas in 1997. This improvement was the result of a better performance by the LPG sector in Spain, together with higher natural gas sales to the residential/commercial and industrial sectors and growing income from our Latin American operations.

Investments made by Repsol during the year amounted to 368,939 million pesetas, and were 27.3% lower than in the previous year. Most of this was spent in the exploration and production area, for the development of producing fields, and in gas, for developing LPG marketing activity, the extension of infrastructure and projects for the integration of the gas-electricity chain in Spain and Latin America.

In December last, Gas Natural Mexico obtained a concession for the State of Guanajuato, in Mexico, with a population of over 2 million inhabitants, thus strengthening its position as the largest gas distributor in that country. Other operations consolidating Repsol�s presence in Latin America were the acquisition of a 75% stake in the company Duragas, which markets LPG in Ecuador and has a 49% share of the distribution market there, with sales of 300,000 tonnes per year; and an increase in Astra�s stake in Metrogas to 45.3%. Repsol, in turn, raised its holding in Astra to 66%.

Back in Spain, a new Law on Hydrocarbons came into force in October last. This Law has eliminated price ceilings on gasoline and defined the basis and legal framework for liberalisation of the natural gas sector.

In December, the Board of Directors of Repsol approved payment of a gross interim dividend of 96 pesetas per share against the 1998 financial year. This represents an increase of 7.9% over the past year�s interim dividend. A final dividend will be approved by the 1998 Annual General Shareholders� Meeting to be held on March 24th, next.

The M1-NC115 well in Libya, which made an important oil discovery, was completed in December of last year. Preliminary studies estimate potential reserves at some 100 to 200 million barrels.

At the beginning of 1999, on January 20th last, Repsol successfully acquired a 14.99% stake in YPF, S.A. in the auction held by the Government of the Argentine Republic. YPF is the largest privately-owned oil and gas company in Latin America. The price tendered for 52,914,700 shares was $2,011 million, or $38 per share, which was the minimum fixed by the Argentine Government. On January 28th last, Repsol�s Chairman and CEO, Alfonso Cortina, was appointed Member of the YPF Board of Directors.