These earnings are the result of a sharp fall in the price of oil and a dramatic contraction of economic activity as well as one-time gains which were booked from the sale of part of YPF in the first quarter of 2008.

In the first quarter of 2009, the decline in international oil process hurt the entire oil industry. The average Brent Crude price was $44.50/bbl, a 54% drop from the $96.70/bbl of the year-earlier period. West Texas Intermediate (WTI) crude averaged $43.30/bbl, a 55.7% decline from the $97.80/bbl seen last year.

Average gas realization prices were $2.5/mcm compared with $4.3/mcm in the previous quarter, a 41.9% decline.

The company’s net debt at the end of the first quarter was EUR5.376 billion, an increase of EUR2.042 billion from the end of 2008, when debt stood at EUR3.334 billion. The increase is due mainly to the purchase of Union Fenosa SA by Gas Natural SDG SA.

Despite the adverse economic conditions worldwide, the company is in a strong financial position with liquidity of EUR6.8 billion and a cash flow which allows Repsol to forge ahead with its investment plans and pay dividends

In accordance with the existing economic scenario, the company has put in place an extraordinary savings plan that has already reached EUR1.5 billion, representing a budget reduction of more than 10% of what was initially forecast for this year. This plan is aimed at revising current expenses, purchases and contracting.

Upstream: Record Number of Discoveries

Upstream (Exploration and Production) operating profit was EUR185 million a 67.9% decline when compared to the first quarter of 2008 as a result of a 54% and 24% decline in oil and gas realization prices respectively.

During the period, Repsol has made a record number of discoveries, registering 10 finds in Brazil, Gulf of Mexico and North of Africa, all key growth areas for the company. The exploratory success of 2009 adds to the significant achievements of 2008, when Repsol participated in three hydrocarbons discoveries.

First quarter hydrocarbons production was 317.000 barrels of oil equivalent per day, 3.1% higher once the contractual and regulatory changes in Bolivia and Libya are excluded and despite the fall in OPEC production quotas.

Investment in the upstream business totaled EUR314 million in the first quarter. Development costs represented 38% of total investment, spent mainly in the US (46%), Trinidad and Tobago (20%) and Libya (9%)

Profit from operations at the liquefied natural gas (LNG) unit was EUR11 million, a 66% decline from the previous year. The result is mainly the consequence of lower wholesale electricity and gas prices in Spain and fewer sales opportunities in Asia.

Investment in the LNG business totaled EUR30 million, spent mainly on the completion of the Canaport LNG terminal in Canada.

Downstream Earnings

Profit from operations at the downstream unit (Refining, Marketing, LPG and Chemicals) adjusted for current cost of supply was EUR316 million, 51.9% higher that the year-earlier period. Operating profit was EUR293 million, a fall of 39.2%. The difference between the value of inventories in the first quarter of 2008 and the first quarter of 2009 is EUR297 million.

Investment in the downstream unit totaled EUR325 million in the first quarter, destined mainly for the expansion of the refinery in Cartagena and the fuel oil unit in Bilbao.

YPF Profit was EUR323 million

Operating income at YPF was EUR323 million, 11.5% less that the previous year.

An increase in domestic market prices partially offset lower income from exports (due to the lower international prices) and sales of products sold in Argentina referenced to those international crude prices.

In the first quarter, YPF investments totaled EUR236 million 83% of which were spent on exploration and production projects.

Gas Natural SDG rose 7.6%

Gas Natural SDG in the fist quarter posted operating income of 169 million against 157 million in the previous year, a rise of 7.6%.

In the first quarter, investment in Gas Natural totaled EUR1.963 billion, spent mainly on the acquisition of Union Fenosa and electricity generation and distribution.

Highlights of 2009

New management structure

Repsol’s board of directors yesterday approved an on February 26, 2009 changes to the company’s management structure aimed at simplifying and concentrating the management team. The new structure reduces by three the number of business units and is a rationalisation and simplification of Repsol’s management structure, reinforcing multidisciplinary business profiles with a global vision and ability to adapt to change.

Reinforcement of Repsol presence in Trinidad and Tobago

Repsol Chairman, Antonio Brufau pledged on February 17, 2009 to increase the company’s investments in Trinidad and Tobago and to take part in new bidding rounds for exploration acreage. Repsol is present in the country through its Atlantic LNG terminal, from which 20% of Spain’s gas is sourced.

Preliminary agreement with Ecuador

On March 13, 2009 Repsol reached an agreement with the government of Ecuador that will allow the establishment of a stable contractual framework within a year.

As part of the agreement, the license to operate block 16 has been extended by six years from 2012 to 2018, and a provisional one-year term has been established during which the Ecuadorian government will reduce taxes on extraordinary benefits from 99% to 70%. Over the next year, a long-term service contract will be negotiated to definitively regulate Repsol’s activities in Ecuador.

Start of production at the Shenzi field

At the end of March 2009, Repsol began producing oil and gas from the Shenzi development in the deepwater area of the Gulf of Mexico, in one of the world’s most attractive offshore oil–producing areas, where Repsol holds 72 exploration licenses.

The producing platform, has a nominal capacity of 100,000 barrels of oil per day and 50 million cubic feet per day of gas. It’s fed by seven wells connected to the platform, is expected to be expanded to a total of 15 producing wells. The project to develop the first phase was completed ahead of time and within budget.

Unprecedented exploratory success

Four new gas finds in Algeria

On January 26, 2009 Repsol has made three new gas finds in Algeria’s Sahara desert: One in the Reggane basin, where the company has already had a number of successes, another in the Ahnet basin, and a third in the Berkine basin. Initial production tests showed output of one million cubic meters/day, indicating the new finds have high gas potential. On April 1, 2009, Repsol made a new find in the Ahnet basin, to the east of the prolific Reggane basin, confirming the potential of the area and offering new development possibilities. Repsol operates the consortium which drilled the TGFO-1 well with a 33.75% stake

Significant oil find in the Gulf of Mexico

Repsol has made a significant new oil find in the deepwater area of the Gulf of Mexico, in US waters. The discovery was made in the Buckskin well in Keathley Canyon, 300 kilometers offshore Houston. Repsol is the operator of the well which shows indications of the existence of significant light and sweet oil resources. It is adjacent to and of a similar geological structure to the Chevron-operated Jack field.