Repsol : 28/07/2016 Information on the results for the first half 2016

28 July, 2016

TABLE OF CONTENTS

UPSTREAM 6

DOWNSTREAM 8

GAS NATURAL FENOSA 9

CORPORATE AND OTHERS 10

SPECIAL ITEMS 11

OPERATING INDICATORS 23

BASIS OF PREPARATION OF THE FINANCIAL INFORMATION

The definition of the Repsol Group´s business segments is based on the delimitation of the different activities performed and from which the Group earns revenue or incurs expenses, as well as on the organizational structure approved by the Board of Directors for business management. Using these segments as a reference point, Repsol's management team (Corporate, E&P and Downstream Executive Committees) analyses the main operating and financial indicators in order to make decisions about segment resource allocation and to assess how the Company is performing. Repsol did not group segments for the presentation of this information.

The operating segments of the Group are:

• Upstream, corresponding to exploration and development of crude oil and natural gas reserves.
• Downstream, corresponding, mainly, to the following activities: (i) refining and petrochemistry,

  (ii) trading and transportation of crude oil and oil products, (iii) commercialization of oil products, petrochemical and LPG, (iv) the commercialization, transport and regasification of natural gas and liquefied natural gas (LNG) and;

• Gas Natural Fenosa, corresponding to its shareholding in Gas Natural SDG, S.A., whose main activities are the distribution and commercialization of natural gas, and the generation, distribution and commercialization of electricity.

Finally, Corporation and adjustments includes activities not attributable to the aforementioned businesses, and specifically, corporate expenses and financial result, as well as intersegment adjustments of consolidation.

Repsol presents the results for each segment including those corresponding to joint ventures and other managed companies operated as such, in accordance with the percentage of interest held by the Group, considering its operational and economic metrics in the same manner and with the same detail as for fully consolidated companies. Thus, the Group considers that the nature of its businesses and the way in which results are analyzed for decision‐making purposes is adequately reflected.

In addition, the Group, considering its business reality and in order to make its disclosures more comparable with those in the sector, utilizes as a measure of segment profit the so‐called Adjusted Net Income, which corresponds to net income from continuing operations at current cost of supply or CCS after taxes and minority interests and not including certain items of income and expense ("Special Items"). Net finance cost is allocated to the Corporation segment's Adjusted Net Income/Loss.

Although this measure of profit (CCS), widely used in the industry to report the earnings generated in Downstream businesses which necessarily work with significant volumes of inventories that are subject to constant price fluctuations, is not accepted in European accounting standards, it does facilitate comparison with the earnings of sector peers and enables analysis of the underlying business performance by stripping out the impact of price fluctuations on reported inventory levels. Using the CCS method, the cost of volumes sold during the reporting period is calculated using the costs of procurement and production incurred during that same period. As a result, Adjusted Net Income does not include the so‐called Inventory Effect. This Inventory Effect is presented separately, net of tax and minority interests, and corresponds to the difference between income at CCS and that arrived at using the Weighted Average

Cost approach, which is the method used by the Company to determine its earnings in accordance with

European accounting regulations.

Likewise, Adjusted Net Income does not include the so‐called Special Items, i.e., certain material items whose separate presentation is considered appropriate in order to facilitate analysis of the ordinary business performance. It includes gains/losses on disposals, personnel restructuring charges, asset impairment losses and provisions for contingencies and charges. Special Items are presented separately, net of the tax effect and minority interests.

However, Adjusted Net Income of the Gas Natural Fenosa segment includes the company's net income in accordance with the equity method.

All of the information presented in this Q2 2016 Results Earnings Release has been prepared in accordance with the abovementioned criteria, with the exception of the information provided in Appendix II "Consolidated Financial Statements" which has been prepared according to the International Financial Reporting Standards adopted by the European Union (IFRS‐EU).

Appendix III provides a reconciliation of the segment reported metrics and those presented in the consolidated financial statements (IFRS‐EU).

In addition, the Group is consolidating the results of the acquired company Talisman Energy Inc.1 ("Talisman") since the date of closing of the transaction, 8 May 2015. The accounting of this business combination is final, once the IFRS 3 "Business combination" prescribed 12‐month period has elapsed.

In accordance with IFRS 6 "Exploration for and evaluation of mineral resources", the Group has considered that the capitalization of geology and geophysics costs (G&G) during the exploratory phase provides a fairer presentation of the assets´ economic reality and performance of its businesses. For more information about this change in the accounting policies, see the Interim Condensed Consolidated Financial Statements for the six‐month period ended 30 June 2016.

In October 2015, the European Securities Markets Authority (ESMA) published the Guidelines on Alternative Performance Measures (APM), of mandatory application for the regulated information to be published from 3 July 2016. Information and disclosures related to APM used on the present Q2 2016 Results Earnings Release are included in Appendix I "Alternative Performance Measures" of the Interim Management Report for the six‐month period ended 30 June 2016.

Repsol will publish today the Interim Condensed Consolidated Financial Statements and the Interim Management Report for the six‐month period ended 30 June 2016 and they will be available on Repsol´s and CNMV's (Comisión Nacional del Mercado de Valores) websites.

1 The registered name of Talisman Energy Inc. was changed to Repsol Oil&Gas Canada Inc. (ROGCI) on 1 January, 2016.

KEY METRICS FOR THE PERIOD

(Unaudited figures)

Results (€ Million) Q2 2015 Q1 2016 Q2 2016 % Change Q2 16/Q2 15

January ‐

June 2015

January ‐

June 2016

% Change 2016/2015

Upstream (48) 17 46 ‐ (238) 63 ‐

Downstream 439 556 378 (13.9) 973 934 (4.0)

‐

(115.4)

(39.3)

NET DEBT 13,264 11,978 11,709 (11.7) 13,264 11,709 (11.7)

NET DEBT / EBITDA CCS (x) 2.52 2.41 2.51 ‐ 2.68 2.43 (0.1)

CRUDE OIL REALIZATION PRICE ($/Bbl) 55.7 30.3 40.1 (27.9) 51.1 35.1 (31.3)

(*) 1,000 Mcf/d = 28.32 Mm3/d = 0.178 Mboe/d.

KEY MILESTONES FOR THE SECOND QUARTER OF 2016

• Adjusted net income in the second quarter was €345 million, 11% higher year‐on‐year. Net income amounted to €205 million, 30% lower year‐on‐year, due to Special Items principally workforce restructuring costs partially offset by net gains from the completion in the second quarter of the sales of the LPG business in Peru, the UK windfarm project and a portion of the piped LPG business in Spain.
• Adjusted net income in the first half of the year was €917 million, 26% lower year‐on‐year mainly due to the positive effect of exchange rate positions taken in the first half of 2015. Net income amounted to €639 million, 39% lower compared to the same period last year, mainly due to the above mentioned exchange rate effect in 2015 and the workforce restructuring costs partially offset by net gains from the completion in the second quarter of sales as noted above.

• Quarterly results for the business units are summarized as follows:

  o Adjusted net income from Upstream was €46 million positive and €94 million higher than in the same period in 2015, mainly due to lower exploration expenses, higher volumes ‐ mainly due to the contribution of acquired assets ‐ and a positive tax effect from the appreciation of local currencies, partially offset by lower realized oil and gas prices.

  • In Downstream, adjusted net income was 14% lower year‐on‐year because of lower volumes produced and a lower refining margin obtained in the quarter due to planned maintenance in the refining system and the market environment. However, these effects were partially offset by better results in the Chemicals, Marketing and LPG businesses.

  • The adjusted net income of Gas Natural Fenosa stood at €96 million, 9% lower year‐on‐year mainly due to lower profits from gas commercialization.

  • In Corporate and others, adjusted net income amounted to €‐175 million.

• Upstream production averaged 697 kboe/d, 33% higher year‐on‐year. The increase in production came mainly from acquired assets, ramp‐up of the Cardón IV project in Venezuela and the Sapinhoá project in Brazil, contribution from Gudrun in Norway and higher production in Perú. This was partially offset by maintenance work in Trinidad and Tobago, cessation of production at Varg in Norway and lower activity in Midcontinent in the United States.

• EBITDA CCS was €1.167 billion, 10% lower compared to that of the second quarter of 2015. EBITDA CCS in the first half of 2016 reached €2.409 billion, 3% lower compared to the same period in 2015.

• The Group's net debt at the end of the quarter stood at €11.7 billion, €0.3 billion lower compared to the first quarter of 2016. The net debt to capital employed ratio stood at 29%.

• Cash flow from operating activities of approximately €1.8 billion covered net investments, interest and dividend payments during the first half of 2016. To aid understanding, please find on page 11 of this document a section regarding Adjusted Cash Flow Statement.

• Material progress was made towards our Synergy and Efficiency Strategic Targets which are expected to deliver over €1.2 billion of benefit this year. By the end of the second quarter 2016 projects have commenced that will secure approximately 70% of the 2016 annual target and by quarter end above 50% of the full year target had already been realized in the financial books.

  NET INCOME PERFORMANCE BY BUSINESS SEGMENT

  UPSTREAM

  (Unaudited figures)

  Results (€ Million)	Q2 2015	Q1 2016	Q2 2016	% Change	January ‐	January ‐
  				Q2 16/Q2 15	June 2015	June 2016	2016/2015
  ADJUSTEDNETINCOME (48) 17 Operatingincome (46) (95) Incometax 0 106 Incomefromequityaffiliatesandnon‐controllinginterests (2) 6			46	‐ (238) ‐ (182) ‐ (56) 50.0 0		63
  			16			(79)
  			31			137
  			(1)			5

  % Change

  ‐

  56.6

  ‐

  ‐

  EBITDA 622 404 529 (14.9) 903

  933

  3.3

  NET INVESTMENT 8,896 638 643 (92.8) 9,649 1,281 (86.7)

  EFFECTIVE TAX RATE (%) 2 (112) (196) (198.0) 31 (173) (204.0)

  % Change January ‐

  International prices Q2 2015 Q1 2016 Q2 2016

  January ‐

  % Change

  Q2 16/Q2 15

  June 2015

  June 2016

  2016/2015

  Brent ($/Bbl) 61.9 33.9 45.6 (26.3) 57.8 39.8 (31.2)

  WTI ($/Bbl) 58.0 33.6 45.6 (21.2) 53.3 39.8 (25.4)

  Henry Hu b ($/MBtu) 2.6 2.1 2.0 (26.0) 2.8 Average exchange rate ($/€) 1.11 1.10 1.13 2.2 1.12	2.0	(28.1) 0.0
  	1.12

  Realization prices	Q2 2015	Q1 2016	Q2 2016	% Change	January ‐	January ‐	% Change
  				Q2 16/Q2 15	June 2015	June 2016	2016/2015
  CRUDE OIL ($/Bbl) 55.7 30.3 40.1 (27.9) 51.1						35.1	(31.3) (24.1)
  GAS ($/Thousand scf) 3.2 2.4			2.3	(28.5) 3.1		2.3

  Exploration (*)	Q2 2015	Q1 2016	Q2 2016	% Change	January ‐	January ‐	% Change
  				Q2 16/Q2 15	June 2015	June 2016	2016/2015
  BONUS, DRY WELLS AND G&A 204 18			46	(77.5) 422		65	(84.6)
  Production	Q2 2015	Q1 2016	Q2 2016	% Change	January ‐	January ‐	% Change
  				Q2 16/Q2 15	June 2015	June 2016	2016/2015
  251	49.4

  LIQUIDS (Thousand bbl/d) 203 255 246 21.3 168

  GAS (**) (Million scf/d) 1,811 2,579 2,530 39.7 1,531 2,554 66.8

  TOTAL (Thousand boe/d)

  525

  714 697

  32.6

  440

  705

  60.2

  (*) Only direct costs attributable to exploration projects. The Group has capitalized G&G by an amount of €106 million during the first half of 2016. For more information about this change in the accounting policies, see the Interim Condensed Consolidated Financial Statements for the six‐month period ended 30 June 2016. (**) 1,000 Mcf/d = 28.32 Mm3/d = 0.178 Mboe/d

  Adjusted net income in the quarter was €46 million positive, €94 million higher than the same period in 2015, mainly due to the impact of lower exploration expenses, higher production volumes and a positive impact from taxes, partially offset by lower realized prices.

  The main variances for the year‐on‐year performance in the Upstream division are as follows:

• Lower crude oil and gas realization prices, net of royalties, had a negative impact on the operating income of €372 million.

• Higher production contributed to an increase in operating income of €290 million thanks to the contribution from the acquired assets, the ramp‐up of the Cardón IV project in Venezuela and the Sapinhoá project in Brazil, contribution from Gudrun in Norway and higher production in Perú. This was partially offset by maintenance work in Trinidad and Tobago, cessation of production at Varg in Norway and lower activity in Midcontinent in the United States.

• As a result of lower exploration activity, principally due to lower amortization of dry wells, the operating income increased by €144 million, excluding exchange rate effect.

• Income tax expense impacted the adjusted net income positively by €32 million, mainly due to the positive effect from appreciation of some local currencies, principally in Brazil.
• Income of equity affiliates and non‐controlling interests, depreciation and amortization, exchange rate and others contains the balance of remaining differences compared to the first quarter of last year.

  Upstream production averaged 697 kboe/d in the second quarter of 2016, 33% higher year‐on‐year.

  During the second quarter of 2016, six wells ‐ three exploratory and three appraisal ‐ were concluded. The three appraisal wells were deemed successful; two exploratory wells were unsuccessful while the third is still under evaluation.

  January - June 2016 results

  The adjusted net income for the first half of 2016 amounted to €63 million, €301 million higher than in the same period of 2015, mainly due to lower exploration expenses, higher production volumes and a positive impact from taxes, partially offset by lower realized prices.

  Average production in the first half of 2016 (705 Kboe/d) was 60% higher than the same period in 2015 (440 Kboe/d), mainly due to the contribution from acquired assets. Net investment

  Net investment in Upstream in the second quarter of 2016 amounted to €643 million, a 28% decrease, excluding the payment for the acquisition of Talisman, compared to the second quarter of 2015, a period in which this company started to be consolidated on 8 May.

  Excluding divestments, Development investment accounted for 71% of the total investment and was concentrated mainly in Trinidad and Tobago (21%), UK (14%), Algeria (14%), Venezuela (14%), the U.S. (13%), Brazil (9%) and Bolivia (6%); and Exploration investment represented 20% of the total and was allocated primarily in Angola (23%), the U.S. (13 %), Brazil (11%), Indonesia (9%), Colombia (9%), Bulgaria (8%), Norway (5%) and Malaysia (3%).

  Net investment in Upstream in the first half of 2016 amounted to €1.281 billion, a 22% decrease, excluding the payment for the acquisition of Talisman, compared to the first half of 2015.

  Excluding divestments, Development investment accounted for 73% of the total investment and was concentrated mainly in Trinidad and Tobago (21%), the U.S. (17%), UK (11%), Brazil (11%), Algeria (10%), Venezuela (9%), Bolivia (5%) and Canada (5%); and Exploration investment represented 21% of the total and was allocated primarily in the U.S. (23%), Brazil (12%), Angola (11%), Indonesia (9%), Colombia (6%), Bulgaria (6%), Australia (4%), Norway (4%) and Algeria (3%).

  DOWNSTREAM

  (Unaudited figures)

  Results (€ Million)	Q2 2015	Q1 2016	Q2 2016	% Ch ange
  				Q2 16/Q2 15	June 2015	June 2016	2016/2015

  January ‐ January ‐ % Ch ange

  ADJUSTED NET INCOME 439 556 378 (13.9) 973 934 (4.0)

  Operating income 622 718 511 (17.8) 1,373 1,229 (10.5)

  Income tax (170) (156) (125) 26.5 (372) (281) 24.5

  Income from equity affiliates and non‐controlling interests (13) (6) (8) 38.5 (28) (14) 50.0

  WEIGHTED AVERAGE COST RECURRENT NET INCOME 522 399 537 2.9 916 936 2.2

  Inventory effect 83 (157) 159 91.6 (57) 2 ‐

  EBITDA	931	671	914	(1.8)	1,655	1,585	(4.2)
  EBITDA CCS	807	886	691	(14.4)	1,743	1,577	(9.5)
  NET INVESTMENT	149	86	(344)	‐	283	(258)	‐
  EFFECTIVE TAX RATE (%)	27	27	24	(3.0)	27	23	(4.0)

  Operational data	Q2 2015	Q1 2016	Q2 2016	% Ch ange
  				Q2 16/Q2 15	June 2015	June 2016	2016/2015

  January ‐ January ‐ % Ch ange

  REFINING MARGIN INDICATOR IN SPAIN ($/Bbl) 9.1 6.3 6.5 (28.6) 8.9 6.4 (28.1)

  DISTILLATION UTILIZATION Spanis h Refining (%) 89.1 85.8 77.0 (21.2) 85.9 81.4 (4.5)

  CONVERSION UTILIZATION Spanish Refining (%) 105.1 103.0 92.5 (12.6) 102.0 97.7 (4.3)

  OIL PRODUCT SALES (Thousand tons ) 11,990 11,125 10,926 (8.9) 22,721 22,051 (2.9)

  PETROCHEMICAL PRODUCT SALES (Thous and tons ) 683 764 713 4.4 1,424 1,477 3.7

  LPG SALES (Thous and tons ) 526 631 422 (19.8) 1,230 1,052 (14.5) NORTH AMERICA NATURAL GAS SALES (TBtu) 57.3 115.5 105.3 83.8 164.2 220.8 34.5

  International prices ($/Mbtu)	Q2 2015	Q1 2016	Q2 2016	% Ch ange
  				Q2 16/Q2 15	June 2015	June 2016	2016/2015

  January ‐ January ‐ % Ch ange

  Henry Hub 2.6 2.1 2.0 (26.0) 2.8 2.0 (28.1) Algonquin 2.2 3.3 2.4 9.1 6.9 2.9 (58.0)

  Adjusted net income in the second quarter of 2016 amounted to €378 million, 14% lower compared to the second quarter of 2015.

  The principal impacts on the quarterly earnings performance year‐on‐year are:

• In Refining, lower utilization rates and lower refining margins, due to planned maintenance, reduced operating income by €224 million. The Refining Margin Indicator declined in the period compared to the same period last year, due to narrower middle distillate and light‐heavy crude spreads partially offset by lower energy costs.

• In Chemicals, higher sales volumes and improved margins, aided by a better market environment, generated a positive effect on the operating income of €14 million.

• In Marketing and LPG, operating income was higher by €54 million, compared to the second quarter of 2015.

• In Trading and Gas & Power, the operating income was €18 million lower than the second quarter of 2015.

• Results in other activities, equity affiliates and non‐controlling interests, exchange rate and taxes

account for the remaining variance.

GAS NATURAL FENOSA

(Unaudited figures)

January ‐ January ‐ % Change

ADJUSTED NET INCOME 105 99 96 (8.6) 227 195 (14.1)

CORPORATE AND OTHERS

(Unaudited figures)

January ‐ January ‐ % Change

Corporate and others accounted for a net expense of €90 million in the second quarter of 2016, compared to a net expense of €54 million in the same quarter of the previous year due to the inclusion of Talisman corporate costs from 8 May, 2015. This effect has been partially offset by lower costs, thanks to the efficiency project, in the Madrid head office in the second quarter of 2016.

In the first half of 2016, Corporate and others accounted for a net expense of €153 million which compares to a net expense of €82 million in the same period of last year, mainly due to the inclusion of Talisman corporate costs since 8 May, 2015.

FINANCIAL RESULTS

(Unaudited figures)

% Change January ‐ January ‐ % Change

Results (€ Million) Q2 2015 Q1 2016 Q2 2016

Q2 16/Q2 15

June 2015

June 2016

2016/2015

TOTAL (199) (77) (185) 7.0 456 (262) ‐

Net financial result in the second quarter of 2016 amounted to €‐185 million, broadly in line with the second quarter of 2015, but lower than the previous quarter, principally due to the gain obtained in the first quarter of 2016 from the repurchase of Talisman bonds.

NET INCOME ANALYSIS: SPECIAL ITEMS

SPECIAL ITEMS

(Unaudited figures)

‐

‐

88

‐

(150)

CASH FLOW ANALYSIS: ADJUSTED CASH FLOW STATEMENT

This section presents the Group's Adjusted Cash Flow Statement:

(Unaudited figures)