Compañía Española de Petróleos, S.A.U. and subsidiaries (Cepsa Group)

Transcription

1 Compañía Española de Petróleos, S.A.U. and subsidiaries (Cepsa Group) Condensed Consolidated Interim Financial Statements and Consolidated Interim Management s Report for the six-month period ended June 30, 2012

2 Compañía Española de Petróleos, S.A.U. and subsidiaries (Cepsa Group) CONDENSED CONSOLIDATED BALANCE SHEETS AT JUNE 30, 2012 AND DECEMBER 31, 2011 ASSETS 06/30/ /31/2011 (*) Non-current assets Intangible assets (Note 4) Intangible assets and rights 748, ,123 Impairment losses and depreciation (287,457) (279,216) Total intangible assets 461, ,907 Goodwill Property, plant and equipment (Note 5) 124,646 62,382 Tangible assets and rights 11,143,607 10,875,723 Impairment losses and depreciation (6,621,921) (6,282,063) Total property, plant and equipment 4,521,686 4,593,660 Investments accounted for using the equity method 235, ,924 Non-current financial assets (Note 8) 240, ,620 Deferred tax assets 60,679 70,009 TOTAL NON-CURRENT ASSETS 5,644,874 5,580,502 Current assets Inventories (Note 6) 2,775,116 2,544,588 Trade and other receivables 2,766,267 2,723,476 Current income tax assets 29,114 21,266 Other current financial assets (Note 8) 302, ,223 Other current assets 16,564 14,301 Cash and cash equivalents 1,437,554 1,304,682 TOTAL CURRENT ASSETS 7,327,447 6,792,536 TOTAL ASSETS 12,972,321 12,373,038 (*) Restated figures (Note 14) (The accompanying explanatory notes 1 to 14 are an integral part of the Consolidated Balance Sheet at June 30, 2012). 2

3 EQUITY AND LIABILITIES 06/30/ /31/2011 (*) Equity (Note 7) Equity Share capital 267, ,575 Share premium 338, ,728 Revaluation reserve 90,936 90,936 Retained earnings 5,060,844 4,742,225 Profits attributable to the Shareholders of the Parent Company 328, ,709 Interim dividend - (160,545) Total Equity 6,086,784 5,918,628 Adjustments for changes in value Translation differences (Note 7.c) 135, ,388 Other adjustments for changes in value (34,455) (21,604) Total adjustments for changes in value 101, ,784 TOTAL EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT COMPANY Minority Interests 6,187,854 6,026,412 Equity attributable to minority interests 68,032 56,073 Profits attributable to minority interests 7,730 16,883 Total Minority Interests 75,762 72,956 TOTAL EQUITY 6,263,616 6,099,368 Non- current liabilities Bank borrowings (Note 8) 2,095,237 1,940,924 Other financial liabilities (Note 8) 116, ,696 Deferred tax liabilities 326, ,710 Grants related to assets 103,219 74,460 Provisions (Note 9) 148, ,802 Other non-current liabilities 31,068 40,171 TOTAL NON-CURRENT LIABILITIES 2,820,644 2,657,763 Current liabilities Bank borrowings (Note 8) 1,181, ,559 Other financial liabilities (Note 8) 34,083 18,817 Trade and other payables 2,532,550 2,896,524 Current income tax liabilities 119,303 50,914 Other current liabilities 20,202 22,093 TOTAL CURRENT LIABILITIES 3,888,061 3,615,907 TOTAL EQUITY AND LIABILITIES 12,972,321 12,373,038 (*) Restated figures (Note 14) (The accompanying explanatory notes 1 to 14 are an integral part of the Consolidated Balance Sheet at June 30, 2012). 3

4 CONDENSED CONSOLIDATED INCOME STATEMENTS FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2012 AND /30/ /31/2011 (*) Sales and services rendered related to the ordinary activity Excise tax on oil and gas charged on sales Revenues (Note 11) Changes in inventories of finished goods and work in progress inventories In-house work on non-current assets Supplies ( ) ( ) Other operating income Personnel expenses ( ) ( ) Changes in operating provisions (39.306) Other operating expenses: Excise tax on oil and gas ( ) ( ) Other expenses ( ) ( ) Depreciation and amortization ( ) ( ) Allocation of Grants related to non-financial assets and other grants Impairment losses and gains or losses on disposals of non-current assets OPERATING INCOME (Note 11) Share in profit of companies accounted for using the equity method Finance income Finance expenses (31.596) (22.612) Impairment and gains or losses on disposals of financial instruments CONSOLIDATED PROFIT BEFORE TAX Income tax ( ) ( ) CONSOLIDATED PROFIT FOR THE PERIOD FROM CONTINUING OPERATIONS CONSOLIDATED PROFIT FOR THE PERIOD (*) Restated figures (Note 14) ( ) ( ) Attributable to: Shareholders of the Parent Minority interests Earnings per share: Basic 1,23 1,48 Diluted 1,23 1,48 (The accompanying explanatory notes 1 to 14 are an integral part of the Condensed Consolidated Income Statements) 4

5 CONDENSED CONSOLIDATED STATEMENTS OF RECOGNIZED INCOME AND EXPENSES FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2012 AND /30/ /30/2011 (*) A) CONSOLIDATED PROFIT FOR THE PERIOD per the income statement 336, ,476 B) INCOME AND EXPENSES RECOGNISED DIRECTLY IN EQUITY: (6,054) (48,987) Cash flow hedges Net investment hedge (2,664) 43,338 Translation differences 4,326 (79,679) Companies accounted for using the equity method (1,750) 355 Tax effect 3,699 (13,001) 406, ,476 C) TRANSFERS TO THE INCOME STATEMENT: (2,470) (291) (9,665) Cash flow hedges (1,173) (357) Companies accounted for using the equity method (1,649) (41) Tax effect TOTAL RECOGNISED INCOME/(EXPENSES) (A+B+C) 327, ,198 (*)Restated figures (Note 14) a) Attributable to the Parent Company 321, ,707 b) Attributable to minority interests 5,919 9,491 ( Las notas 1a xx descritas en la Memoria forman parte de estos Balances de Situación consolidados) (The accompanying explanatory notes 1 to 14 are an integral part of the condensed consolidated statement of recognized income and expenses) 5

6 CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2012 AND 2011 CURRENT PERIOD Share capital Share premium and reserves Treasury shares Profit for the period attributable to the parent Other equity instruments Adjustments due to changes in fair value Minority interests Total equity Ending balance at 12/31/ ,575 5,011, , ,784 72,956 6,099,368 Adjustments due to changes in accounting policies Adjustments due to errors Beginning balance adjusted 267,575 5,011, , ,784 72,956 6,099,368 Total recognized income/(expenses) 328,701 (6,714) 5, ,906 Transactions with shareholders or owners 160,545 (321,090) (3,113) (163,658) Distribution of dividends 160,545 (321,090) (3,113) (163,658) Other changes in equity 318,619 (318,619) Transfers between equity items 318,619 (318,619) Ending balance at 06/30/ ,575 5,490, , ,070 75,762 6,263,616 PRIOR PERIOD Share capital Share premium and reserves Treasury shares Profit for the period attributable to the parent Other equity instruments Adjustments due to changes in fair value Minority interests Total equity Ending balance at 12/31/ ,575 4,671, , ,250 70,625 5,759,126 Adjustments due to changes in accounting policies Adjustments due to errors Beginning balance adjusted 267,575 4,671, , ,250 70,625 5,759,126 Total recognized income/(expenses) 396,170 (48,463) 9, ,198 Transactions with shareholders or owners 120,409 (254,196) (7,475) (141,262) Distribution of dividends 120,409 (254,196) (7,475) (141,262) Other changes in equity 379,750 (379,750) Transfers between equity items 379,750 (379,750) Ending balance at 06/30/ ,575 5,171, ,170 66,787 72,641 5,975,062 (The accompanying explanatory notes 1 to 14 are an integral part of the condensed consolidated statements of changes in equity sheets) 6

7 CONDENSED CONSOLIDATED CASH FLOW STATEMENTS FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2012 AND 2011 Cash flow s from operating activities 06/30/ /30/2011 (*) Profits before taxes for the year 595, ,604 Depreciation, impairment losses and results from disposals of assets 368, ,242 Change in provisions for contingencies and charges 10,378 39,378 Grants relating to assets and other deferred income transferred to the income statement (21,107) (47,126) Gains/(losses) on disposal of financial assets (1,243) (783) Current provisions changes 39,306 (7,765) Other changes (22,656) (32,630) Cash flow s from operating activities before change in w orking capital 968, ,920 Change in working capital (650,359) (564,965) Interest Payments (27,348) (20,948) Interest Collected 16,453 11,688 Dividends Collected 15,367 12,043 Tax Income (Payments)/Collections (192,575) (180,377) Other cash flow from operation activities (188,103) (177,594) Total cash flows from operating activities 129, ,361 Cash flow s from investing activities PAYMENTS Intangible assets (15,848) (14,911) Property, plant and equipment (238,342) (214,593) Non-current financial assets Associates and other investments (21) (24,476) Other financial assets (74,139) (41,455) Acquisition of consolidated shares (129,222) (7,972) Grants collected 3,715 2,363 Total payments (453,857) (301,044) COLLECTIONS Intangible assets (421) 710 Property, plant and equipment 30,977 1,941 Non-current financial assets 2,076 5,086 Total collections 32,632 7,737 Total cash flows from investing activities (421,225) (293,307) Cash flow s from financing activities DIVIDENDS PAID: To shareholders of the parent company (Note 7.d) (160,545) (133,787) To minority interest (3,113) (7,475) Total dividends paid (163,658) (141,262) Net change in non-current financial liabilities 644, ,148 Net change in current financial liabilities 68, ,569 Net change in financial investments paid (125,000) - Finance lease payments paid - (2,808) Total cash flows from bank debt 587, ,909 Total cash flows from financing activities 424, ,647 Net change in cash and cash equivalents 132, ,701 Effect of changes in exchange rates 283 (1,990) Beginning balance of cash and cash equivalents 1,304, ,798 Ending balance of cash and cash equivalents 1,437,554 1,060,509 7

8 Breakdown of the change in operating working capital Inventories (247,101) (429,128) Trade and other receivables (53,214) ( ) Other current financial assets 7, ,00 Trade and other payables (345,874) ,00 Other changes (11,176) Total changes in operating working capital (650,359) (564,965) (*) Restated figures (Note 14) (The accompanying explanatory notes 1 to 14 are an integral part of the Condensed Consolidated Balance Sheet at June 20, 2012) 8

9 Explanatory Notes to the Condensed Consolidated Financial Statements for the six-month period ended June 30, 2012 Compañía Española de Petróleos, S.A.U. and Subsidiaries (CEPSA Group). 1. CEPSA Group activities Compañía Española de Petróleos, S.A.U. (hereinafter CEPSA ), whose registered office is at Avenida del Partenón 12 (Campo de las Naciones), Madrid, was incorporated for an unlimited period of time on 26 September 1929 and is registered in the Madrid Mercantile Register in Volume 206 of the Companies book, Page 100, Sheet Its Employer Identification Number is A CEPSA and its subsidiaries (hereinafter the CEPSA Group or The Group ) compose an integrated business Group which operates in the oil and gas industry in Spain and abroad and engages in business activities relating to the exploration for and extraction of crude oil, the production of petrochemical and energy products, asphalts, lubricants and polymers and the distribution and marketing thereof; as well as the distribution of gas and the generation of electricity. Table I of the notes of CEPSA consolidated financial statements for 2011, details the directly or indirectly owned subsidiaries, jointly controlled entities and associates which, together with CEPSA, compose the CEPSA Group. The table lists these companies' registered offices and lines of business, together with the most significant economic and financial information corresponding to the year The Group's consolidated financial statements for 2011 were approved on 29 March Basis of presentation and other information a) Basis of presentation In accordance with Regulation (EC) no. 1606/2002 of the European Parliament and of the Council of 19 July 2002, all companies governed by the law of a European Union Member State must present their consolidated financial statements for the years beginning on or after 1 January 2005 in accordance with International Financial Reporting Standards as previously adopted by the European Union (IFRSs). The Group s consolidated financial statements for 2011 were formally prepared by the Directors in accordance with International Financial Reporting Standards as adopted by the European Union, applying the consolidation basis, accounting policies and measurement basis described in Notes 2 and 3 of the aforementioned consolidated financial statements and, accordingly, they present fairly the Group's consolidated equity and consolidated financial position at 31 December 2011 and the consolidated results of its operations, the changes in its consolidated equity and its consolidated cash flows in the year then ended. 9

10 These condensed consolidated half-yearly financial statements are presented in accordance with IAS 34, Interim Financial Reporting, and they were authorized for issue by the Group s directors on August 2, In accordance with IAS 34, the interim financial information is prepared exclusively to update the content of the last annual consolidated financial statements prepared by the Group, focusing on new activities, events and circumstances arising during the six-month period, and does not duplicate the information previously reported in the consolidated financial statements for Consequently, in order to be able to properly comprehend the information included in these condensed consolidated half-yearly financial statements, they should be read together with the Group s consolidated financial statements for Changes in accounting policies IAS 31, Interests in Joint Ventures establishes two options for consolidating entities under joint control in the financial statements of the venturer, the equity method or the proportionate method. The Cepsa Group has decided to apply the equity method beginning January 1, 2012, modifying the criteria followed up to the aforementioned date, which was to account for such entities using the proportionate method. The Group considers the latter criteria will provide more relevant information that is in line with those applied by the IPIC Group to which it belongs. In accordance with IAS 8 relating to voluntary changes in accounting policies, the Group has applied this new policy retroactively and has thus recognized the corresponding restatements in both its consolidated financial statements and the related disclosures. Consequently, the beginning comparative balances of the consolidated financial statements have been restated in accordance with the newly selected accounting policy and detailed information of the adjustment in each of the headings comprising the consolidated balance sheet has been provided (Note 14). EU-approved standards and interpretations applicable in the period The accounting policies applied in the preparation of the consolidated financial statements for the interim period ended June 30, 2012 are the same as those applied in the preparation of the consolidated financial statements for the year ended December 31, 2011, with the exception of the following amendments and interpretations: Amendment to IFRS 7 Disclosures Transfers of financial assets effective from periods beginning on or after July 1, Application of this amendment and interpretation has not had a significant impact on these interim consolidated financial statements. 10

11 Standards and interpretations published by the IASB, approved by the EU but not applicable in the period Standard or interpretation Content Effective date (*) IAS 1 amended Basis for conclusions 07/01/2012 IAS 19 amended Employee Benefits 01/01/2013 (*) Years commencing on or after the effective date The Group is currently analyzing the impact of applying this new and amended standard. Based on the analyses carried out to date, the Group considers that the application of these standards and amendments will not have a significant impact on the consolidated financial statements in the initial period. Standards and interpretations published by the IASB not yet approved by the EU. At the date of authorization these consolidated financial statements for issue, the following new and amended standards had been published by the IASB but were not mandatory applicable and had yet to be endorsed by the European Union: 11

12 Standard or interpretation Content Effective date (*) IFRS 9 Financial instruments 01/01/2015 IFRS 10 Consolidated Financial Statements 01/01/2013 IFRS 11 Joint arrangements 01/01/2013 IFRS 12 Disclosure of other interests in Other Entities 01/01/2013 IFRS 13 Fair value measurement 01/01/2013 IAS 27 amended Consolidated and Separate Financial Statements 01/01/2013 IAS 28 amended Investments in Associates and Joint Ventures 01/01/2013 IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine 01/01/2013 IAS 32 amended Offsetting Financial Assets and Financial Liabilities 01/01/2013 IFRS 7 amended Disclosures: Offsetting Financial Assets and Financial Liabilities 01/01/2013 IAS 12 Deferred Tax- Recovery of Underlying Assets 01/01/2012 Improvements to IFRS 01/01/2013 (*) Years commencing on or after the effective date The Group is currently analyzing the impact of applying these new and amended standards. Based on the analyses carried out to date, the Group considers that the application of these standards and amendments will not have a significant impact on the consolidated financial statements in the initial period. All mandatory accounting principles and policies with a significant effect on the condensed consolidated interim financial statements were applied. b) Use of estimates and assumptions The information contained in these financial statements is the responsibility of the Group's Directors, who expressly state that all the principles and methods provided for in IFRSs have been applied. The main accounting principles and policies and measurement basis are indicated in Notes 2 and 3 of CEPSA 2011 consolidated financial statements. 12

13 In the preparation of the consolidated financial statements in accordance with IFRSs, the Directors were required to make estimates and assumptions. The final figures might differ on the basis of these estimates and assumptions. These estimates and assumptions relate basically to the following: - Determination of the recoverable amount for the calculation of impairment losses on certain assets, - Estimation of the expected average weighted tax rate for the year which, in accordance with IAS 34, is used to calculate the income tax expense, - Estimated crude oil reserves, which is performed or reviewed by the Group's engineers based on regulations established by the Petroleum Engineers Society; these estimates are made based on approximate crude at the location, recoverability factors, and forecast prices. This estimation of crude oil reserves mainly affects depreciation calculated using the unit-of-production method, and also the calculation of the recoverable amounts based on the analyses of impairment tests performed on exploration and production assets, - Actuarial calculation of post-employment benefit liabilities and obligations, - Useful life of property, plant and equipment and intangible assets, - Measurement of liabilities relating to provisions. Although these estimates were made on the basis of the best information available at the present date on the events analyzed, events that take place in the future might make it necessary to change these estimates (upwards or downwards) at 2012 year-end or in subsequent years. Changes in accounting estimates would be applied prospectively in accordance with the requirements of IAS 8, recognizing the effects of the change in estimates in the corresponding consolidated income statements. In the six-month period ended June 30, 2012, there were no significant changes with respect to the estimates used at 2011 year-end. c) Seasonality of the Group s transactions In view of the business activities in which the Group companies engage, their transactions are not of a cyclical or seasonal nature. Therefore, no specific disclosures are included in these explanatory notes to the condensed consolidated half-yearly financial statements for the six-month period ended June 30, d) Materiality In accordance with IAS 34, in deciding the information to be disclosed on the various items in the financial statements or other matters in the notes to the financial statements, the Group took into account their materiality in relation to the condensed consolidated half-yearly financial statements. e) Functional currency The items included in the consolidated financial statements of each of the Group companies are measured 13

14 using the functional currency, i.e., the currency of the main economic environment in which each of these companies operate. The consolidated financial statements are presented in euros, which is the presentation currency of the Cepsa Group. 3. Comparative information and changes in the composition of the Group a) Comparative information The information contained in these condensed consolidated interim financial statements related to 2011 is presented solely for the purposes of comparison with the information for the six-month period ended June 30, b) Changes in the composition of the Group Tables I and II of the appendices to the consolidated financial statements for the year ended December 31, 2011 provide information on Group companies consolidated at that date and those accounted for using the equity method, as well as the main transactions and assets accounted for under joint control. In the first half of 2012 the only significant investment in other entities was the purchase of all the shares of Chevron España, on March 30, This company's name was later changed to Cepsa Carburantes y Lubricantes (S.L.U). This business combination has been accounted for on a provisional basis. The impact on net income at June 30, 2012 was not material. Had the operation taken place on January 1, 2012, it is estimated that the additional contribution to consolidated revenue and net income for six-month period would not have been material. The fair value recognized in respect of this company's net assets (assets acquired less liabilities assumed) at the date of acquisition: Fair value at acquisition Assets 127,611 Liabilities 25,535 Net Assets 102,076 Goodwill 64,670 Acquisition cost of the combination 166,746 As a result of the provisional accounting of this business combination, at June 30, 2012 the heading of the Balance Sheet Goodwill amounted to EUR 124,646 thousand. 14

15 Changes in the scope of consolidation The scope of consolidation at June 30, 2012 differs from the scope considered at the end of 2011 due to the following changes: Company Full/ proportionate consolidation Investments in companies accounted for using the equity method Cepsa Carburantes y Lubricantes, S.L.U. I _ Cepsa EE.SS. Canarias, S.L.U. I _ Asfaltos Españoles, S.A. (ASESA) (1) E I Cepsa Chimie Becancour, INC. (1) E I Cepsa Chimie Montreal, S.E.C. (1) E I Cepsa Gas Comercializadora, S.A. (1) E I Nueva Generadora del Sur, S.A. (1) E I Cepsa Oleos e Gas Do Brasil I _ I= Inclusion; E= Exclusion (1) See notes 2.a and 14 On the other hand, the scope of consolidation at June 30, 2011 differs from the scope considered at the end of 2010 due to the following change: Company Full/ proportionate consolidation Investments in companies accounted for using the equity method CQ PET, S.A. I _ Servicios Energéticos de Alta Eficiencia, S.A. I _ I= Inclusion; E= Exclusion 15

16 4. Intangible assets At June 30, 2012 and 2011, the additions for the period related basically to the value of emission rights granted at zero cost under the National Allocation Plans in force each year, which amounted to EUR 46,062 thousand and EUR 100,106 thousand, respectively. Disposals at June 30, 2012 and 2011 correspond primarily to the delivery of emissions rights assumed in 2011 and 2010 which totaled EUR 33,600 thousand and EUR 63,985 thousand, respectively. 5. Property, plant and equipment a) Changes in the period The additions to property, plant and equipment in the first six months of 2012 and 2011 amounted to EUR 287,393 thousand and EUR 195,164 thousand, respectively, and relate most notably to the following items: - In the Exploration and Production business lines, an increase in exploration activities in several countries. - In the Refining and Marketing business lines, property, plant, and equipment were incorporated related to the acquisition of Cepsa Carburantes y Lubricantes, S.L.U. (Note 3.b), as well as the connection of the land section of the oil pipeline at La Rábida Refinery, in general, improvements to industrial facilities to minimize the environmental impact and improve safety of the Group's activities. - Noteworthy for the petrochemical business line is the project for setting up the Fenol/Cumeno plant in Shanghai, which is scheduled to begin operating in the second half of The most notable investments in the area of Gas and Electricity were the replacement of turbines at various GEPESA-owned plants. Disposals and retirements of tangible assets in the first half of 2012 and 2011, mainly included the derecognition of technical installations and data processing equipment. Practically all of these assets were fully depreciated. b) Impairment losses There were no material impairment losses on items of property, plant and equipment in the first six months of 2012 and c) Property, plant and equipment purchase commitments At June 30, 2012 and at December 31, 2011, the Group had property, plant and equipment purchase commitments amounting to EUR 246,850 thousand and EUR 104,670 thousand, respectively, relating mainly to investments in course. 16

17 6. Inventories The breakdown of Inventories at June 30, 2012 and December 31, 2011 is as follows: Thousands of Euros 06/30/ /31/2011 Inventories 2,810,718 2,547,576 Provisions (35,602) (2,988) Total 2,775,116 2,544,588 In the first half of 2012, the Group recognized an increase in the impairment of inventory amounting to EUR 35,602 thousand to adjust the carrying amount of inventory to their net realizable value, due principally to price reductions during said period. 7. Equity a) Share capital and share premium The share capital amounts to EUR 267,575 thousand and consists of 267,574,941 fully subscribed and paid shares of EUR (1) par value each represented by the book-entry system. The Company is wholly owned by its sole shareholder, International Petroleum Investment Company (IPIC), which owns 100% of CEPSA share capital. The Spanish Corporate Law expressly permits the use of the share premium account balance to increase share capital and does not establish any specific restrictions as to its use. During 2012 and 2011, the balance of this account which amounted to EUR 338,728, has not experimented any changes. b) Revaluation reserve In 1996 CEPSA and several consolidated Group companies revalued their property, plant and equipment pursuant to Royal Decree-Law 7/1996, of 7 June, thereby increasing their net assets by EUR 58,438 thousand; additionally several subsidiaries of CEPSA Group also made the revaluation that amounted to EUR 58,438 thousand. This latter figure was recognized under Consolidated Reserves in the consolidation process, included under the heading Retained Earnings in the accompanying condensed consolidated balance sheets. The revaluation reserve also includes EUR 32,498 thousand relating to the revaluations made in 1979 and 1981 pursuant to State Budget Laws 1/1979 and 74/1980, respectively, which can now be transferred to unrestricted voluntary reserves. The balance of the Revaluation Reserve, Royal Decree-Law 7/1996 account can be used, free of tax, to eliminate recognized losses and to increase capital. From 1 January 2007 (i.e. ten years after the date of the balance sheet reflecting the revaluation transactions), the balance of this account can be taken to unrestricted reserves, provided that the monetary surplus has been realized. The surplus will be deemed to have been realized in respect of the portion on which depreciation has been taken for accounting purposes or when the revalued assets have been transferred or derecognized. If this balance were used in a manner other than that provided for in Royal Decree-Law 7/1996, it would be subject to tax. 17

18 c) Translation differences The detail, by company, of the balance of Translation Differences is as follows: Thousands of Euros Company 06/30/ /31/2011 Deten Quimica, S.A. 27,214 34,159 Cepsa Chimie Montreal, LP (10,055) (10,785) Cepsa Colombia, S.A. 113, ,883 Other companies 4,810 1,131 Total translation differences 135, ,388 The change in the balance of this heading at June 30, 2012 was basically due to the fluctuation of initial and final exchange rates of the Brazilian Real and US dollar. d) Dividends paid by the Company Interim Dividend Paid during the Period in the condensed consolidated balance sheet at December 31, 2011 includes the dividend paid out of CEPSA's profit in 2011 which amounted to EUR 160,545 thousand. As per the minute of March 29, 2012 ratifying the resolutions of the sole shareholder of Compañía Española de Petróleos, S.A.U., the sole shareholder resolved to pay a dividend of EUR 1.20 per share out of the profit for 2011 which, after deducting the interim dividend already paid, gave rise to a final dividend of EUR 0.60 per share. The dividend was paid on April 3, The shareholders at the Annual General Meeting held on April 27, 2011 resolved to pay a dividend of EUR 0.95 per share out of the profit for 2010 which, after deducting the interim dividend already paid, gave rise to a final dividend of EUR 0.50 per share. This dividend was paid on May 9, It is not necessary to calculate the diluted earnings per share of the CEPSA Group since equity financial instruments, such as potential ordinary shares, on capital were not contracted. 8. Breakdown and disclosure of financial assets and liabilities Following is a detail of the financial assets and liabilities at June 30, 2012 and December 31, 2011, by type and category for valuation purposes: 18

19 06/30/2012 Thousands of Euros FINANCIAL ASSETS BY TYPE / CATEGORY Held for trading financial assets Available- forsale financial assets Loans and receivables Hedging derivatives Equity instruments 19,759 19,759 Debt instruments 199, ,943 Other financial assets 21,139 21,139 Non-current 19, , ,841 Debt instruments 170, ,701 Derivatives 4, ,664 Other financial assets 126, ,467 Current 4, , ,832 TOTAL 4,917 19, , ,673 12/31/2011 Thousands of Euros FINANCIAL ASSETS by TYPE / CATEGORY Held for trading financial assets Available- forsale financial assets Loans and receivables Hedging derivatives Equity instruments 24,684 24,684 Debt instruments 130, ,092 Other financial assets 21,844 21,844 Non-current 24, , ,620 Debt instruments 180, ,429 Derivatives 3,269 3,269 Other financial assets Current 3, , ,223 TOTAL 3,269 24, , ,843 06/30/2012 FINANCIAL LIABILITIES BY TYPE / CATEGORY Held-for trading Borrowings and Hedging financial payables derivatives liabilities TOTAL Bank borrowings 2,095,237 2,095,237 Other financial liabilities 116, ,792 Non-current 2,212,029 2,212,029 Bank borrowings 1,181,923 1,181,923 Derivatives 15,423 15,423 Other financial liabilities 18,660 18,660 Current 15,423 1,200,583 1,216,006 TOTAL 15,423 3,412,612 3,428,035 Total Total 12/31/2011 FINANCIAL LIABILITIES BY TYPE / CATEGORY Held-for trading Borrowings and Hedging financial payables derivatives liabilities TOTAL Bank borrowings 1,940,924 1,940,924 Other financial liabilities 115, ,696 Non-current 2,056,620 2,056,620 Bank borrowings 627, ,559 Derivatives Other financial liabilities 17,898 17,898 Current , ,376 TOTAL 456 2,702, ,702,996 19

20 9. Provisions and contingent liabilities The main litigations of a tax and legal nature affecting the Group at December 31, 2011 was described in Notes 14, 17 and 21 of the consolidated financial statements for the year then ended. In the first half of 2012 there were no significant changes in the litigation in progress and no material additional claims were filed against the Group. With regard to the inspections underway in connection with Corporation Income Tax for the CEPSA Tax Group for fiscal years 2005 to 2008, the preliminary assessments issued by the inspection team were received in May Some of these assessments were signed in conformity and recognized in the Group's accounting records, and their effect is reflected in the accompanying condensed interim financial statements. However, there are other assessments that the Group has decided to appeal and which are being evaluated by the competent bodies. Group Management does not expect significant liabilities from the tax declarations currently being inspected for which a provision was not constitute. 10. Related parties and remuneration and other benefits of directors and senior executives In addition to sole shareholder, subsidiaries, associates and jointly controlled entities, the key management personnel of the Company (members of the Board of Directors and executives, together with their close relatives) and the companies in which key management personnel could have a significant influence or control are also deemed to be related parties. The CEPSA Group did not perform any significant transactions with its directors and executives in the first half of The Group s transactions with related parties in the first six months of 2012 and 2011, drawing a distinction between key shareholders and other related parties, are shown below. The conditions of the transactions with related parties are the same as those of transactions carried out on an arm's length basis and the corresponding compensation in kind was allocated to the transactions. 20

21 RELATED PARTY TRANSACTIONS 06/30/2012 EXPENSES AND INCOME Substantial shareholdings Directors and executive Companies or entities in the group(*) Other related parties Finance expenses Leases 1,891 1,891 Services received , ,957 Purchases of assets (finished or in progress) 243, ,287 Other expenses EXPENSES , ,437 Finance income 5,426 5,426 Services rendered 293 7,293 7,587 Sales of assets (finished or in progress) 1,342,705 1,342,705 Other income INCOME 293 1,355,631 1,355,925 Total 06/30/2012 OTHER TRANSACTIONS Substantial shareholdings Directors and executive Companies or entities in the group(*) Other related parties Dividends and other profits distributed 160, ,545 (*) Companies accounted for using the equity method. RELATED PARTY TRANSACTIONS 06/30/2011 EXPENSES AND INCOME Substantial shareholdings Directors and executive Companies or entities in the group(*) Other related parties Finance expenses Leases Services received 2, , ,790 Purchases of assets (finished or in progress) 515, , ,304 Other expenses EXPENSES 517, , ,471 Finance income 76 4,470 4,546 Services rendered 264 9,325 9,589 Sales of assets (finished on in progress) 404,789 1,088,791 1,493,580 Other income INCOME 405,139 1,103,013 1,508,152 Total Total 06/30/2011 OTHER TRANSACTIONS Substantial shareholdings Directors and executive Companies or entities in the group(*) Other related parties Dividends and other profits distributed 128, ,297 (*) Companies accounted for using the equity method. Total 21

22 Remuneration and other benefits of directors At June 30, 2012, the Board of Directors was composed of 6 male members. At June 30, 2011, the Board of Directors was composed of 13 members, including one woman and 12 men. The remuneration earned by the directors of the Group at June 30, 2012 and 2011 was as follows: Type of remunerations Thousands of Euros 06/30/ /30/2011 Fixed remuneration Variable remuneration Per diems Bylaw-stipulated directors emoluments 1,990 2,295 Pension funds and plans: contributions and obligations Total 3,026 3,959 Remuneration and other benefits of senior executives ( High Management ) At June 30, 2012, the senior executives were the 4 members of the Executive Committee that are directors (Board members). The number of senior executives at 30 June 2011 was 15. The detail of remuneration of the senior executives that are not directors of the consolidated Group at 30 June 2012 and 2011 is as follows: Type of remunerations Thousands of Euros 06/30/ /30/2011 Fixed remuneration - 2,447 Variable remuneration - 1,304 Other concepst Pension funds and plans: contributions and obligations - 1,371 Total - 5, Segment reporting a) Business segment reporting: The CEPSA Group organizes and manages its businesses through four business segments: Exploration and Production, which includes oil and gas exploration and production activities. Refining and Marketing, which include supply, refining and distribution activities. Petrochemicals Derivatives, which includes their production, distribution and marketing 22

23 Gas and Electricity, which includes combined heat and power production and the distribution and retailing of electricity and natural gas. The selling prices between the business segments approximate market prices and the amounts of income, expenses, assets and liabilities were determined before the eliminations on consolidation, except for the internal eliminations of each business segment. The financial data shown below was obtained using the same methodology and internal reporting structures as those established to provide management information and to measure the profitability of the business segments on a basis consistent with the year Segment reporting at June 30, 2012 and 2011 Compañía Española de Petróleos, S.A.U. and Subsidiaries (Consolidated Group)) SEGMENT REPORTING Information excluding Non-Recurring Items Exploration& Refining& Gas & Intra-Group Non-recurring Total 06/30/2012 Production Distribution Petrochemical Power Eliminations Total Items Consolidated REVENUE NET INCOME Revenue from external customers 427,721 11,656,188 1,689, ,833-14,382,089-14,382,089 Intra-Group revenue 224,293 1,409, ,589 81,408 (2,430,734) - - Total revenue 652,014 13,065,632 2,404, ,241 (2,430,734) 14,382,089-14,382,089 Excise tax on oil and gas charged on sales - (1,016,673) (1,016,673) - (1,016,673) Revenue without excise tax on oil and gas 652,014 12,048,959 2,404, ,241 (2,430,734) 13,365,416-13,365,416 Supplies and Changes in inventories of finished goods and work in progress (47,909) (10,919,724) (2,041,698) (617,921) 2,296,913 (11,330,339) 145,367 (11,184,972) Other operating income and expenses (148,382) (904,738) (249,346) (48,096) 133,821 (1,216,741) (1,216,741) RESULT 455, , ,892 24, , , ,703 Changes in operating allowances / provisions for bad debt - (6,234) (734) 110 (6,858) (32,448) (39,306) Changes in other provisions (1,626) (2,071) (3,015) (3,015) Depreciation and amortization (176,992) (163,514) (34,344) (4,883) (379,733) (379,733) Allocation to profit or loss of grants related to non-financial assets and others , ,254 6,254 Impairment and gains or losses on disposals of non-current assets 7,518 4,651 (525) (21) 11,623 11,623 Profit from operations 284,623 58,306 84,162 19, , , ,526 Share in profits of equity companies - 9,272 5,856 5,212 20,340 (506) 19,834 Net financial profit 14,733 14,733 Impairment and gains or losses on disposals of financial instruments 1,243 1,243 Consolidated profit before tax 482, , ,336 Income tax (225,030) (33,875) (258,905) Profit/loss for the year from discontinuing operations Consolidated net profit for the year 257,893 78, ,431 Attributable to minority interests (7,730) - (7,730) Profit attributable to Shareholders of the Parent 250,163 78, ,701 23

24 SEGMENT REPORTING Information excluding Non-Recurring Items Exploration& Refining& Gas & Intra-Group Non-recurring Total 12/31/2011 Production Distribution Petrochemical Power Eliminations Total Items Consolidated NET INCOME REVENUE Revenue from external customers 470,081 10,727,835 1,589, ,774-13,070,048-13,070,048 Intra-Group revenue 52, ,454 35,057 59,464 (940,870) - - Total revenue 522,976 11,521,289 1,624, ,238 (940,870) 13,070,048-13,070,048 Excise tax on oil and gas charged on sales - (1,105,914) (1,105,914) - (1,105,914) Revenue without excise tax on oil and gas 522,976 10,415,375 1,624, ,238 (940,870) 11,964,134-11,964,134 Supplies and Changes in inventories of finished goods and work in progress (18,412) (9,345,986) (1,276,588) (394,997) 936,178 (10,099,805) 241,502 (9,858,303) Other operating income and expenses (121,730) (873,163) (224,503) 74,464 4,692 (1,140,240) - (1,140,240) RESULT 382, , ,324 21, , , ,591 Changes in operating allowances/ provisions for bad debt (841) 11,102 (65) - 10,196 (1,459) 8,737 Changes in other provisions (443) (12,236) 11,871 (71) (879) - (879) Depreciation and amortization (126,315) (164,420) (34,723) (3,330) (328,788) (328,788) Allocation to profit or loss of grants related to non-financial assets and others ,079-4,868 4,868 Impairment and gains or losses on disposals of non-current assets 8 (419) Profit from operations 255,243 31, ,442 18, , , ,075 Share in profits of equity companies - 18,921 6, ,811 6,404 32,215 Net financial profit 3,532-3,532 Impairment and gains or losses on disposals of financial instruments Consolidated profit before tax 440, , ,605 Income tax (208,116) (72,013) (280,129) Profit/loss for the year from discontinuing operations - Consolidated net profit for the year 232, , ,476 Attributable to minority interests (10,306) - (10,306) Profit attributable to Shareholders of the Parent 221, , ,170 24

25 b) Geographical segment reporting: The breakdown of revenue by geographical area is as follows: Revenue from sales to external customer 06/30/ /30/2011 Spain (*) 9,766,468 9,071,503 Other EU Countries 2,173,433 1,813,154 Africa 738, ,243 América 1,349,275 1,208,105 Rest of the world 354, ,043 Total consolidated 14,382,089 13,070,048 (*) In Spain, the data relating to 2012 and 2011 included under Revenue from Sales to External Customers includes excise taxes. c) Information on non-recurring items: The breakdown, by business segment, of the main items composing this heading is as follows: 06/30/2012 Exploration & Production Refining & Distribution Petrochemical Gas & Power Total Profit from operations Difference from inventories measurement at replacement cost - 103,298 9, ,919 Total - 103,298 9, ,919 Consolidated profit Difference from inventories measurement at replacement cost - 72,309 6,735-79,044 Difference from inventories measurement at replacement cost (Equity accounting method socie - - (1,554) 1,048 (506) Total - 72,309 5,181 1,048 78,538 06/30/2011 Exploration & Production Refining & Distribution Petrochemical Gas & Power Total Profit from operations Difference from inventories measurement at replacement cost - 223,444 16, ,043 Total - 223,444 16, ,043 Consolidated profit Difference from inventories measurement at replacement cost - 156,411 11, ,030 Difference from inventories measurement at replacement cost (Equity accounting method socie - - 5,382 1,022 6,404 Total - 156,411 17,001 1, ,434 Non-recurring items include the difference in the value of inventories between the average cost method -used in the financial statements- and replacement cost -used to measure business segments-, thus facilitating the analysis of business segment performance and comparison between years. 25

26 12. Average headcount The average number of employees at June 30, 2012 and 2011, by gender, is as follows : Labor Force by Gender 06/30/ /30/2011 Men 8,044 7,975 Women 4,038 3,888 12,082 11, Subsequent events On July 1, 2012, CEPSA reached an agreement for the sale of 100% of its shares in Cepsa Egypt S.A., B.V. The transaction was finalized on July 26, 2012, and thus said company no longer belongs to the Group as of the aforementioned date. 14. Change in accounting policies in application of IAS 31 In accordance with IAS 8 relating to voluntary changes in accounting policies, below the Group presents the comparison of the consolidated statement of financial position and the consolidated income statement, using the equity method on the consolidated statement of financial position and the proportionate method on the consolidated income statement for the comparative years (Note 2). 26

27 Condensed consolidated balance sheets at December 31, 2011 Compañía Española de Petróleos S.A.U. and Subsidiaries (CEPSA Group) ASSETS 2011 Financial Statements 12/31/2011 New criteria Non-current assets Intangible assets Intangible assets and rights 740,997 (16,874) 724,123 Impairment losses and depreciation (284,674) 5,458 (279,216) Total intangible assets 456,323 (11,416) 444,907 Goodwill 62,382-62,382 Property, plant and equipment Tangible assets and rights 11,388,888 (513,165) 10,875,723 Impairment losses and depreciation (6,561,973) 279,910 (6,282,063) Total property, plant and equipment 4,826,915 (233,255) 4,593,660 Investments accounted for using the equity method 118, , ,924 Non-current financial assets 139,325 37, ,620 Deferred tax assets 76,302 (6,293) 70,009 TOTAL NON-CURRENT ASSETS 5,679,880 (99,378) 5,580,502 Current assets Inventories 2,605,213 (60,625) 2,544,588 Trade and other receivables 2,798,557 (75,081) 2,723,476 Current income tax assets 30,494 (9,228) 21,266 Other current financial assets 125,810 58, ,223 Other current assets 16,164 (1,863) 14,301 Cash and cash equivalents 1,315,014 (10,332) 1,304,682 TOTAL CURRENT ASSETS 6,891,253 (98,717) 6,792,536 TOTAL ASSETS 12,571,133 (198,095) 12,373,038 EQUITY AND LIABILITIES 2011 Financial Statements 12/31/2011 New criteria Equity Equity Share capital 267, ,575 Share premium 338, ,728 Revaluation reserve 90,936-90,936 Retained earnings 4,742,225-4,742,225 Profits attributable to the Shareholders of the Parent Company 639, ,709 Interim dividend (160,545) - (160,545) Total Equity 5,918,628-5,918,628 Adjustments for changes in value Translation differences 129, ,388 Other adjustments for changes in value (21,604) - (21,604) Total adjustments for changes in value 107, ,784 TOTAL EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT COMPANY 6,026,412-6,026,412 Minority Interests Equity attributable to minority interests 56,073-56,073 Profits attributable to minority interests 16,883-16,883 Total Minority Interests 72,956-72,956 TOTAL EQUITY 6,099,368-6,099,368 Non- current liabilities Bank borrowings 1,957,673 (16,749) 1,940,924 Other financial liabilities 151,572 (35,876) 115,696 Deferred tax liabilities 336,216 (2,506) 333,710 Grants related to assets 78,234 (3,774) 74,460 Provisions 155,985 (3,183) 152,802 Other non-current liabilities 40,171-40,171 TOTAL NON-CURRENT LIABILITIES 2,719,851 (62,088) 2,657,763 Current liabilities Bank borrowings 636,640 (9,081) 627,559 Other financial liabilities 83,997 (65,180) 18,817 Trade and other payables 2,971,335 (74,811) 2,896,524 Current income tax liabilities 52,507 (1,593) 50,914 Other current liabilities 7,435 14,658 22,093 TOTAL CURRENT LIABILITIES 3,751,914 (136,007) 3,615,907 TOTAL EQUITY AND LIABILITIES 12,571,133 (198,095) 12,373,038 27

28 Condensed consolidated income statements at June 30, 2011 Compañía Española de Petróleos S.A.U. and Subsidiaries (CEPSA Group) 06/30/2011 Financial Statements 06/30/2011 New criteria Sales and services rendered related to the ordinary activity 12,124,875 (160,741) 11,964,134 Excise tax on oil and gas charged on sales 1,105,914-1,105,914 Revenues 13,230,789 (160,741) 13,070,048 Changes in inventories of finished goods and work in progress inventories 240,150 (8,346) 231,804 In-house work on non-current assets 23,816-23,816 Supplies (10,224,869) 134,762 (10,090,107) Other operating income 23, ,855 Personnel expenses (289,178) 7,735 (281,443) Changes in operating provisions 8, ,737 Other operating expenses: Excise tax on oil and gas (1,105,704) 1 (1,105,703) Other expenses (951,553) 4,546 (947,007) Depreciation and amortization (340,976) 12,188 (328,788) Allocation of Grants related to non-financial assets and other grants 47,200 (2,883) 44,317 Impairment losses and gains or losses on disposals of non-current assets OPERATING INCOME 661,681 (11,606) 650,075 Share in profit of companies accounted for using the equity method 22,018 10,197 32,215 Finance income 25, ,144 Finance costs (23,972) 1,360 (22,612) Impairment and gains or losses on disposals of financial instruments CONSOLIDATED PROFIT BEFORE TAX 685, ,605 Income tax (279,354) (775) (280,129) CONSOLIDATED PROFIT FOR THE PERIOD FROM CONTINUING OPERATIONS 406, ,476 CONSOLIDATED PROFIT FOR THE PERIOD 406, ,476 (406,405) Attributable to: Shareholders of the Parent 396, ,170 Minority interests 10,306-10,306 Earnings per share: Basic Diluted