Repsol's net income for the third quarter of 1997 was 8% higher than in the same period a year earlier, at 27,536 million pesetas. This rise in income produced a 2.5% higher accumulated income for the first nine months of 1997 than the figure for the same period of 1996, reaching 89,163 million pesetas. Operating income up to September was 163,407 million pesetas, showing a 14% rise on year earlier figures. Net accumulated cash-flow is the best indication of the company s positive performance, and was 26% higher than in 1996, at 231,791 million pesetas.

All activities improved this period, except gas, which suffered the negative effect of an LPG (bottled gas for residential use) price freeze calculated at 15,300 million pesetas; and warm temperatures this winter, which reduced income by an estimated 8,450 million pesetas. However, high international refining margins and appreciation of the dollar with regard to the peseta made a marked contribution to these good income figures. This satisfactory performance was achieved in an atypical year, in which - apart from the effect of the aforementioned price freeze and a mild winter - Repsol carried out an asset revaluation which led to higher amortizations over the first nine months of the year, reducing operating income by 14,700 million pesetas.

Repsol continued to strengthen its presence in Latin America, successfully completing several operations there. Through Astra, in Argentina, after acquiring an additional 60% stake, the company now controls 93% of EG3, which, with 614 service stations, represents an 11% share of the Argentinian market. In June, Repsol won a concession to exploit the Mene Grande area in Venezuela, where a large increase in crude oil production and a considerable rise in reserves is expected. It also won four exploration blocks in Bolivia. The company has also increased its gas distribution activities in Brazil, Colombia and Mexico. In Brazil, through its affiliate Gas Natural SDG, in a consortium with other companies, it acquired 56.41% and 75% respectively of the Brazilian companies CEG and Riogas, and through Gas Natural Latinoamericana, won the tender for distribution of natural gas in Santa Fe de Bogot�, Colombia, and the metropolitan area of Toluca, Mexico, thus furthering its expansion in this sector.

In a break-down of income by activities, the following points are worth mentioning:

In exploration and production, accumulated operating income, was 61.9% higher than at the same date in 1996, at 33,874 million pesetas. The higher exchange rate of the dollar against the peseta had a positive influence on income, more than compensating for low oil prices on international markets. Astra s contribution also boosted operating income for this activity. Production was 28% higher than last year due to the inclusion of output from Pluspetrol and Mexpetrol fields, and a good performance by the Harding field in the North Sea, amongst other factors. Additional oil discoveries were also made. Finally, Repsol signed an exploration and production contract on the A and B blocks in Libya, in the Murzuq basin, near the NC-115 concession, where it is operator.

Accumulated operating income from refining and marketing was 45.2% higher than in 1996, at 81,682 million pesetas. Improved international refining margins and a higher dollar/peseta exchange rate favoured income over the period. Good operating figures in Latin America for this activity also had a positive effect, and, in general, sales of oil products rose by 11.8% in comparison to those for the same period a year earlier.

Accumulated operating income from chemicals for the first nine months of 1997 was 3.8% up on 1996 figures, at 19,595 million pesetas. Base chemicals showed a strong rise in operating income in comparison with year earlier performance, although derivative chemicals were affected by higher feedstock costs. Important projects were carried out over the nine month period, such as a new polypropylene plant and cogeneration unit at Tarragona.

In gas, accumulated operating income registered 29,044 million pesetas by September 30th last, and was 39% down on the figure for the same nine months in 1996. This was mainly because of the aforementioned LPG price freeze and mild winter temperatures in 1997. In spite of this, LPG and natural gas sales rose by 5% and 28.2% respectively in comparison to last year.

Overall investments by Repsol up to September, 1997, were 389,044 million pesetas, of which 223,097 million pesetas were to strengthen Repsol s presence in Latin America. In the refining and marketing area, capital expenditure went to link up and build service stations, and to improve refinery units.

REPSOL SUMMARISED INCOME STATEMENT

(Million pesetas)

(Non-audited figures)

_____________________
$= 149.260 pesetas in 1997
$= 128.41 pesetas in 1996
(1) This includes financial results, goodwill amortization and income from non-consolidated affiliates
(2) Before tax
(3) After tax

REPSOL COMPARATIVE BALANCE SHEET

(Million pesetas)

(Non-audited figures)