The Refining, Marketing, Liquefied petroleum gas (LPG) and chemicals (downstream) businesses posted an operating profit of EUR1.111 billion, negatively affected by a EUR729 million decline in the value of inventories compared with 2007 based on current accounting rules.

The 2008 earnings were marked by an international environment affected by the high price of crude oil and the strength of the euro against the dollar in the first half of that year, and a significant downturn in both indicators in the second half. Despite these adverse conditions, the company has a solid financial position that has allowed it to end the year with more than 6.8 billion euros of liquidity and reduce debt by 159 million euros, to reach a debt/capital employed ratio of 11.9% on employed capital.

In 2009, the company has put in place an extraordinary savings plan that has already reached 1.5 billion euros, meaning a budget reduction of more than 10% of what was initially forecast for this year. This plan is focused on revising current expenses, purchases and contracting, and the company has created a department to monitor expenses and investments to reinforce and promote the adopted measures.

Following in the same line of austerity, the chairman, board and management have frozen their salaries, an example set by Repsol’s governing body and management of their commitment to achieving savings objectives.

The company will continue to make the necessary investments for key projects in its 2008-2012 Strategic Plan. In 2008, investments carried out by Repsol reached 5.586 billion euros, representing a rise of 4% from him previous year, in line with the annual investment objectives set out in the Strategic Plan.

“We’ve cut non-essential spending to devote our efforts to the strategic investments, those which will guarantee the company’s future success,” Repsol Chairman Antonio Brufau said.

REPSOL’S UPSTREAM ROSE 20%

The company’s core business, made up of the upstream, downstream and LNG units posted income from operations of EUR3.494 billion, against 4.193 billion in 2007.

It is especially significant that upstream operating profit rose 20% (Exploration and Production) to 2.258 billion euros. The good result is due mostly to an improvement in the realisation prices of company’s oil product and gas mix, with oil gaining of 36.9%, and gases 43.2%.

In 2008 hydrocarbons production was 333.000 barrels of oil equivalent per day, and remains in line with the previous year, when excluding the effects of the contractual and regulatory changes in Bolivia and the partial or total end of operations in Dubai and Ecuador.

Profit from operations at the liquefied natural gas (LNG) unit was 125 million euros, a rise of 16.8% from the previous year. The improvement in earnings was largely due to increased gas prices, rising market demand and the optimization of the Repsol tanker fleet, and higher wholesale electricity power prices in Spain.

Profit from operations at the downstream unit (Refining, Marketing, LPG and Chemicals) was 1.111 billion euros, representing a fall of 49.6% from the previous year. This is due to the severe negative impact of a fall in the value of inventories of prime material and refined products resulting in a significant reduction of profit in the business. In addition, earnings at the chemicals business fell 352 million euros due to reduced demand and the decrease of stocks in the transformation and distribution chain.

Excluding inventories and extraordinary items, Downstream earnings fell 2.1% compared to 2007.