The first quarter of 2009 was marked by a sharp downturn in global economic activity, compounded by the credit crunch on financial markets. In this environment, crude and petroleum product prices were decisively lower than levels posted in both first quarter and full-year 2008, albeit slightly higher than prices recorded at the end of December 2008.

Specifically, developments in key indicators impacting the industry were as follows:

The price of European benchmark Brent Blend, which started out the year at $40.04/bbl, reached an average of $44.40/bbl in the quarter, notably less than the $54.9/bbl posted in the preceding quarter and significantly lower than the level of $96.90/bbl in the first quarter of 2008.

Refining margins, as published by the International Energy Agency – IEA – for the area where CEPSA’s refineries are located (Ural Med Hydroskimming and Ural Med Cracking), performed poorly. Distillation (Hydroskimming) margins continued to be negative (–$2.3/bbl) although higher than the -$4.6/bbl in the first quarter of 2008 as a result of the improvement in fuel oil, whose spread vis-à-vis crude oil rose +$179/t. As for conversion (Cracking) margins, they fell to $1.6/bbl, slipping -$3.4/bbl, attributable to the unfavorable trend in motor fuel spreads (gasoline, -$19/t and especially motor diesel, -$64/t), caused by sluggish demand.

Compared to the last quarter of 2008, the two refining margin indicators were significantly lower in the first quarter of 2009: -41% and -58%, respectively.

Regarding the US dollar against the euro, it basically remained in line with levels seen in the last quarter of 2008 ($1.30/EUR vs. $1.32/EUR); nonetheless, this exchange rate was up 15% when compared to the rate in the first quarter of 2008, which stood at $1.50/EUR.

Adjusted Earnings – Summary

In Q12009, the CEPSA Group posted an adjusted operating income of EUR150 million, up EUR6 million, or 4%, from the same period last year.

The lower tax burden in Exploration & Production, resulting from the drop in crude oil prices, reduced the average tax rate from 51% to 41% and favorably impacted adjusted net income, which amounted to EUR85 million, 27% more than in the same quarter of 2008.

These earnings figures were generated in a dismally adverse operating environment that negatively impacted the company’s upstream segment (E&P), which is very sensitive to the price of crude oil; its Petrochemicals segment, where margins and business activity by its main customers declined, and gas & power, hindered by the high price of natural gas versus the decrease in electricity prices.

Activity

CEPSA’s crude oil production from its working interests in the first quarter of 2009 amounted to 118.6 thousand BOPD, 4% higher than in the same period of 2008. Likewise, the Company’s entitlement in the period, understood to be the amount assigned to CEPSA after applying contractual conditions and before paying taxes, stood at 5.6 million barrels, up 59% from the previous year.

CEPSA added production from the Caracara block in Colombia as of March 2008. This new contribution came in addition to sales from barrels produced in the company’s Algerian acreages, which were higherin the first quarter of 2009 than in the same period of 2008 as a result of lower crude oil prices in the current year.

Furthermore, CEPSA continued its intensive exploration efforts in Algeria (3 blocks, 1 as operator), Colombia (20 blocks, 13 as operator), Peru (five blocks, four as operator) and Egypt (three blocks, one as operator).

Earnings

Overall, the exploration & production segment posted an adjusted operating income in the first quarter of 2009 of EUR24 million, 67% less than in the same quarter of 2008. This result was obtained after deducting EUR62 million in amortization and depreciation, on account of the inclusion of assets in the Caracara field (Colombia) and greater exploration activity, meaning an increase of EUR25 million compared to the same period the year before.

Earnings posted by CEPSA in the first quarter of 2009 in this segment were unfavorably impacted by the slump in crude oil prices, much lower than in the same quarter of last year: Brent averaged $44.4/bbl in 2009 versus $96.90/bbl a year earlier.