Repsol's net income for the first nine months of 1996 was 86,976 million pesetas, showing a 5.6% drop with respect to the 92,149 million pesetas obtained last year. Operating income for the three quarters was 143,036 million pesetas and net cash-flow was 183,928 million pesetas.

Income improved in this period for all activities except chemicals, affected by narrower international margins which were much lower during the third quarter of 1996 than they were a year earlier. Results were also constrained by unfavourable marketing conditions in Europe, and some high investments made by the company, considered of great importance for its future, but on which returns will not be visible for several years. Other factors affecting performance were a recovery in international refining margins, which were much better than the same period last year; higher crude oil prices and behaviour of the peseta, which depreciated slightly against the dollar and rose against the deutschmark.

During the third quarter, acquisition of a controlling share package in the Argentinian company, Astra, and a stake in the La Pampilla refinery in Peru, where Repsol is technical operator, was formalized. From the third quarter of this financial year onwards, income from these new affiliated companies is consolidated in Repsol accounts by the global integration method. In the summer months, tests were undertaken for the start-up of the Maghreb-Europe pipeline, and its commercial exploitation began on November 1st.

There follows a break-down by activities of the highlights for the period:

Exploration and production operating income rose by 27% over last year, to 20,922 million pesetas. Here, income was boosted by better crude oil prices over the period ($19.68 per barrel in comparison to $17.06 per barrel in 1995), and the start-up of production from the Harding field in the United Kingdom and the East Delta gas and condensate field in Egypt. The Harding field reached higher stable production levels more quickly than originally thought, and the East Delta field also went on stream before expected. Lastly, since July, operating income has included Astra E & P operating income.

These new production start-ups raised production over the first nine months of 1996 by 6% in comparison with the same period last year, to 7.95 million tonnes.

Refining and marketing operating income was 3.7% up on last year, at 56,272 million pesetas. These results reflect the positive effect of higher refining margins, as mentioned above.

These good figures were achieved in spite of labour disputes at the Petronor refinery, causing 16 days of production stoppage. There was also a fall in gross margins on gasolines in Spain caused by the price war at service stations in the U.K. and the exclusion of premium (leaded) gasoline prices in Holland from the maximum price formula.

Last September, Repsol began a new sales policy intended to boost consumption of unleaded petrol in Spain. Since then, discounts on gasoline price ceilings have been practised throughout Repsol's service station network. These discounts have been applied according to specific criteria, including geographical discrimination, and are much greater in the case of unleaded Eurosuper 95 ron than in that of leaded premium gasoline.

Operating income from chemicals for the first three quarters of 1996 was 18,882 million pesetas in contrast to 57,942 million pesetas registered in 1995. Margins on both base and derivative petrochemicals fell drastically in comparison to last year, but preliminary forecasts indicate that margins on base and derivative petrochemicals will be a little better over the last quarter of 1996.

Three-quarterly income from the gas activity was 47,647 million pesetas in comparison to 42,204 million pesetas in 1995, showing a 13% rise. Both LPG and natural gas activities contributed to this good performance. Sales were higher in the LPG sector and operating costs were lower, in spite of narrower unitary margins caused by not up-dating distribution costs in the current maximum price formula. In the natural gas area, sales were also higher and a rise in the residential/commercial tariff was approved in September, last.

Repsol made overall investments of 222,423 million pesetas in the period from January to September. 84,090 million pesetas were invested in refining and marketing: 23,324 of these for the acquisition of Astra (attributable to refining and marketing) and the La Pampilla refinery. A great part of capital expenditure in this area is still dedicated to linking up service stations. 62,238 million pesetas were spent on exploration and production, 45% of this on Astra (attributable to E&P). In gas, an investment outlay of 57,828 million pesetas was made: 58% of this went to natural gas transmission infrastructure and the rest to developing natural gas distribution networks and other investments in the LPG sector.

REPSOL SUMMARISED INCOME STATEMENT

(Milllion pesetas)

Non audited figures

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$= 128.41 pesetas in1996

$= 123.44 pesetas in 1995

* Includes financial results, goodwill amortization and equity on earnings of unconsolidated affiliates

REPSOL COMPARATIVE BALANCE SHEET

(Million pesetas)

Non audited figures