Repsol has recently completed two important transactions as part of its strategy to strengthen its presence in Latin America, where it already carries out activities in Ecuador, Peru, Mexico and Argentina.

On June 6th last, Repsol signed an agreement for the acquisition of a controlling 37.7% stake in the Argentinean company Astra Compa��a Argentina de Petr�leo, S.A. (C.A.P.S.A.). The transaction involved an amount of 360 million USA dollars (M$).

In addition to this, on June 11th, a consortium, headed by Repsol, won a tender for a 60% stake in the La Pampilla, S.A. Refinery in Peru. The former will be technical operator of the refinery with approximately 50% of the consortium. The price offered for this 60% of capital equity in the La Pampilla refinery was 180.5 million dollars.

These two operations form part of Repsol's on-going strategy, reinforcing the group's presence in Peru, where it had already begun marketing activities, and in Argentina, where it was already engaged in exploration and production and natural gas distribution through Gas Natural Buenos Aires Norte.

Both these acquisitions will have a positive effect on Group income from 1996 onwards.

ANNEX 1

ARGENTINA: ASTRA. COMPA��A ARGENTINA DE PETR�LEO, S.A.

Astra is an Argentinean company, integrated in the oil sector from the stages of exploration and production through to the marketing of refined products, natural gas and electricity.

In 1995, Astra obtained 325.2 million dollars in operating revenues, 62.2 M$ in operating income and a net profit of 46 M$. Shareholders' equity is currently 568 million dollars.

The acquisition of a stake in Astra forms part of Repsol's strategy to strengthen its activities in Latin America. It is the company's largest transaction in the area to date.

In fact, Astra will act as a base from which Repsol will develop and intensify its international activities in Argentina, whilst it already provides an important business volume.

1.- ACQUISITION TERMS

The 37.7% stake purchased by Repsol gives it management control of the company. The remaining shares are listed on the Buenos Aires and Geneva stock markets and are owned by some 16,500 shareholders, some of them European and American institutional investors. The company's market capitalisation at the time of acquisition was 737 million dollars. The final cost of Repsol's share package was 360 million dollars, which theoretically represents a 30% premium on the bourse price.

Apart from the rights of ownership on this 37.7% of capital equity, a directors fee is contemplated for running the company. Calculations based on a moderate estimate of this management compensation for coming years indicate that the premium paid on market capitalisation is, in fact, approximately 19%.

About a year ago, Astra started a programme to rationalise assets and reduce overhead and personnel costs. Repsol considers that application of this programme would produce an important economic saving, which would considerably improve future income statements. This process consists of furthering policies already in place to cut costs and divest non-essential assets, whilst encouraging growth in basic businesses such as marketing, production, gas, asphalts and lubricants. New developments in LPG and refining specialities are also contemplated.

2.- DESCRIPTION OF ASTRA'S ASSETS

The company's main assets in each phase of activity are as follows:

2.1 Exploration and production

Hydrocarbon reserves at the beginning of the second quarter of 1996 were 133 million barrels of crude oil and 101 million barrels of oil equivalent in gas. These reserves amount to around 40% of Repsol's net reserves at the end of 1995.

Oil production in 1995 was 11 million barrels of crude and some 7 million barrels of oil equivalent in gas.

Practically all the company's activity is concentrated in Argentina, where it is the fifth largest operator, with production levels nearly as high as the third and fourth. It also conducts exploration and production activities in Venezuela.

2.2 Refining y marketing

Through its two affiliate companies, EG3 (32.5%) and Refinor (10.5%), Astra participates in two refineries with similar capacities, whose joint refining capacity is approximately 60,000 barrels per day.

EG3 is the fourth largest operator on the Argentinean market in the distribution of oil products, with a 13.5% market share. It has a network of over 600 sales outlets and annual sales of 2,500 million litres, and is also engaged in the production and marketing of asphalt (with a market share of some 25%) and lubricants (with a 4% market share). The company also owns storage terminals with a capacity of 150,000 m3 in the port of Buenos Aires for the import and dispatch of oil products.

Refinor is in the North of the country and has 1,100 kilometres of polyduct, natural gas fractionating units, and facilities for the storage and dispatch of liquid fuels and LPG. It has also begun to set up a service station network, which currently has 15 sales outlets.

2.3 Gas and electricity

Astra has a 14% stake in Metrogas, which distributes 6.2 billion cubic metres of natural gas to 1.7 million customers in the South of Buenos Aires. 41% of sales are for power generation.

This participation in the electricity sector consists of two generating facilities, with 42 MW between them, and a 5% interest in Edenor. The latter distributes 10 million MWh to 2.1 million consumers.

2.4 Shipping

Shipping is carried out through affiliated companies, and focuses on the transport of oil and oil derivatives within the region. The fleet is made up of 14 tankers and has an overall capacity of 370,000 DWT. 8 million tonnes were shipped in 1995, with a 91% rate of occupation.

2.5 Other businesses

Astra also participates in an engineering and construction company (Astra Evangelista) and a crude oil storage and transport company (Oldeval y Termap).

SUMMARY OF ASTRA INCOME STATEMENTS FOR THE 1995 FINANCIAL YEAR

Exchange rate applied to convert dollars to pesetas: 121,71 Ptas,/Dollar

ASTRA COMPARATIVE BALANCE SHEET AT DECEMBER 31ST. 1995

ANNEX 2

PERU: LA PAMPILLA REFINERY

Refinadores del Per�, S.A. (Refipesa), a business consortium headed by Repsol in Lima, has won an International Public Tender on a 60% interest in the La Pampilla, S.A. refinery.

Refipesa was created recently, under the leadership of Repsol, which holds a 50% stake. The other shareholders are the oil companies YPF (Argentina) and Mobil (USA), with approximately 25% and 10% respectively. The remaining shares are owned by the Peruvian companies Gra�a y Montero, Banco Wiese and the Peru Privatisation Fund.

Repsol will be technical operator of the newly acquired refinery.

The state-owned company, Petroper�, will still be active in the oil business through share packages retained in each of the Business Units privatised. In the case of the Pampilla refinery, this will be 40%.

This acquisition reinforces the position taken up by Repsol in other sectors of the Peruvian oil market, such as the distribution of fuels (which it began in 1995 through the company Corpetrol) or the LPG market, and is a step forward in the company's presence in Latin America.

There will be a positive effect on income from 1996 onwards, even with refining margins as low as last year's, when, it should be recalled, they were the lowest of the last ten years and inferior to those currently registered in 1996.

This impact will increase as the programme for small investments is carried out, whether or not there is any improvement in the aforementioned margin scenario.

Should prospects change to make larger investments advisable, the effect on profit would become considerably greater.

1.- ACQUISITION TERMS

The price offered for this 60% stake in the La Pampilla refinery was 180.5 million dollars, of which 142.5 M$ will be paid in cash and the remaining 38 M$ at face value in Peruvian Elegible Debt. This implies an effective disbursement of 165 million dollars, of which 50% will be paid by Repsol.

The corporation set up to run the refinery promises to make investments to the value of, at least, 50 million dollars over the next 5 years. These investments will form part of a plan to modernize and improve the efficiency of these facilities, whilst adapting them to comply with Peruvian environmental regulations. Logically, the cost of these investments will be shared between the partners in proportion to their interests (Refipesa, 60%/Petroperu, 40%).

Valuation was based on the discount of estimated free cash-flow, calculated from a model of the refinery using linear programming techniques and forecasts for the Market Area in coming years.

For this valuation, it was considered - in a conservative estimate - that investments in modernization, technological improvements, digitalization, safety and environment for somewhat more than 50 million dollars would be non-profitable. However, certain other investments were judged to generate value, including a visbreaker and an isomerization plant.

At all times, calculations contemplated a margin scenario similar to that for the period 93 to 95, which was very unfavourable for the refining activity. Because of this, additional investments in conversion or re-vamping have been discarded, whereas under different circumstances, these would have increased economic value of the refinery by raising production capacity for light and medium distillates, in which the Lima market is deficient.

2.- DESCRIPTION OF THE REFINERY

The La Pampilla refinery was built in 1967, with a 20,000 barrel per day capacity. It was re-vamped in 1977 to its current capacity of 102,000 barrels, and has a limited conversion capacity.

This Refinery's most attractive feature is its good geographical position, some 25 km. from Lima, in a region where consumption accounts for 50% of the whole Peruvian market for oil products, which the facility only partially covers.