Repsol Credit Update Presentation to Fixed Income Investors December 2011
Disclaimer ALL RIGHTS ARE RESERVED REPSOL YPF, S.A. 2011 Repsol YPF, S.A. is the exclusive owner of this document. No part of this document may be reproduced (including photocopying), stored, duplicated, copied, distributed or introduced into a retrieval system of any nature or transmitted in any form or by any means without the prior written permission of Repsol YPF, S.A. This document does not constitute an offer or invitation to purchase or subscribe shares, in accordance with the provisions of the Spanish Securities Market Law (Law 24/1988, of July 28, as amended and restated) and its implementing regulations. In addition, this document does not constitute an offer of purchase, sale or exchange, nor a request for an offer of purchase, sale or exchange of securities in any other jurisdiction. In particular, this document does not constitute an offer to purchase, subscribe, sale or exchange of Repsol YPF's or YPF Sociedad Anonima's respective ordinary shares or ADSs in the United States or otherwise. Repsol YPF's and YPF Sociedad Anonima's respective ordinary shares and ADSs may not be sold in the United States absent registration or an exemption from registration under the US Securities Act of 1933, as amended. The resources mentioned in this document do not constitute proved reserves and will be recognized as such when they comply with the formal conditions required by the U. S. Securities and Exchange Commission. In addition, this document contains statements that Repsol YPF believes constitute forward-looking statements which may include statements regarding the intent, belief, or current expectations of Repsol YPF and its management, including statements with respect to trends affecting Repsol YPF s financial condition, financial ratios, results of operations, business, strategy, geographic concentration, production volume and reserves, capital expenditures, costs savings, investments and dividend payout policies. These forward-looking statements may also include assumptions regarding future economic and other conditions, such as future crude oil and other prices, refining and marketing margins and exchange rates and are generally identified by the words expects, anticipates, forecasts, believes, estimates, notices and similar expressions. These statements are not guarantees of future performance, prices, margins, exchange rates or other events and are subject to material risks, uncertainties, changes and other factors which may be beyond Repsol YPF s control or may be difficult to predict. Within those risks are those factors described in the filings made by Repsol YPF and its affiliates with the Comisión Nacional del Mercado de Valores in Spain, the Comisión Nacional de Valores in Argentina, the U.S. Securities and Exchange Commission in the United States and with any other supervisory authority of those markets where the securities issued by Repsol YPF and/or its affiliates are listed. Repsol YPF does not undertake to publicly update or revise these forward-looking statements even if experience or future changes make it clear that the projected performance, conditions or events expressed or implied therein will not be realized. The information contained in the document has not been verified or revised by the Auditors of Repsol YPF. 2
Agenda Introduction Strategic Plan Update and Key Accomplishments Financial Overview Conclusions 3
Introduction Today we will review Repsol s operations and financial performance for 2010-11. Repsol has a EUR 750 million Floating Rate Note bond maturing on February 16 th, 2012. Our current liquidity position fully covers the refinancing of the FRN and short term maturities. We believe that the recapitalization of banks will reduce bank loans to corporations, creating the need for companies to raise more funding in the capital markets. We expect some crowding-out to occur in the capital markets due to the significant refinancing needs of governments, public sector and financial institutions. Given the above, we intend to further diversify our funding sources in 2012. 4
Agenda Introduction Strategic Plan Update and Key Accomplishments Financial Overview Conclusions 5
Strategic Plan Update Upstream - Key Accomplishments to Date Transformed into the growth engine through attractive portfolio of projects Upstream and LNG Delivered on the development of key upstream projects to date including I/R Libya, Brazil, Shenzi, Canaport and Peru LNG Strong recent exploration successes position Repsol among the top explorers worldwide: Carioca NE, North Guara, Abare, Malombe, Gavea Improved operational performance metrics allow favourable comparison with leading upstream players Transformation via successful exploration 6
Strategic Plan Update Upstream - Key Projects sustaining targets Shenzi 800 MUS$ Development of deepwater oil field in the U.S. GoM - W.I. Repsol : 28% - FID: 2006 Production: 121 kboe/d Kinteroni 250 MUS$ Block 57 wet gas field delineation and development W.I. Repsol : 53.8 % - FID: 2009 Production: 5 Mm3/d Margarita- Huacaya 370 MUS$ 2 gas/liquids fields under development in Caipipendi block W.I. Repsol : 37.5%; (Op) - FID: 2010 Production: 11 Mm3/d (2nd phase) Piracuca 350 MUS$ Cardon IV 750 MUS$ Perla s offshore gas field under development W.I. Repsol : 32.5% (co-op.) - FID: 2011 Production: 8 Mm3/d (1st phase) Guara1,250 MUS$ Carabobo 750 MUS$ Start-up of extra-heavy crude production field in the Orinoco Belt W.I. Repsol : 11% FID: 2012 Production: 400 kboe/d Albacora Leste Lubina- Montanazo 90 MUS$ Development of new oil discoveries adjacent to production fields. W.I. Repsol : 100% (Lubina); 75% (Montan.) (Op) Production: 5.6 kboe/d Reganne 400 MUS$ 6 onshore gas fields under development W.I. Repsol :29.3% (Op) -FID: 2009 Production: 8 Mm3/d I/R 140 MUS$ Development of oil field I/R, belonging to the blocks NC 186 and NC 115 W.I. Repsol: 20% (NC-115), 16% (NC-186) (foreign Op.) - FID: 2007 / Production: 75 kboe/d Development of oil and gas field in the shallow waters of Santos Basin W.I. Repsol :22.2% - FID: 2011 Production: 25 kboe/d Development of Santos basin pre-salt oil field W.I. Repsol : 15% - FID: 2010 Production: 250 kboe/d W.I. Repsol : 6% Important pre-salt discovery in evaluation MUS$ NET CAPEX 10-14 Projects with a better performance New projects not considered in SP Update 2010-2014 (April 2010) 1. All production figures indicate gross plateau production 7
Strategic Plan Update Upstream - On track with 2014 objectives Production growth 3-4% p.a. to 2014 and 5% p.a. from 2015 to 2019 Net production (Mboe) Total reserves (MBoe) Proved reserve replacement ratio greater than 110% 250 200 150 100 3-4% 5% 200 % 160 % 120 % 80 % 65 % 94 % 128 % > 140 % > 110 % 50 3% 40 % 0 2009 2010 2014 2019 0 % 2008 2009 2010 2011 E 2014 Exploration & Contingent Resources Key growth projects Currently Producing Assets Expect to deliver production targets despite dilution in Brazil 1. All figures exclude Argentina and consider 40% dilution in Brazil assets 8
Strategic Plan Update Downstream - Key Accomplishments to Date Downstream Development of best-in-class downstream portfolio which is now fully-invested (two key growth projects, Cartagena and Bilbao. completed by the end of 2011) in time and below budget Leading competitive position as an integrated player in Spain Enhanced capability to capture differentiated margins in a profitable market Best-in-class, fully invested assets in middle distillates importing country With both projects on stream we expect a premium on our refining margin of at least 2 US$ per barrel 9
Strategic Plan Update Downstream - On Track with 2014 Objectives Conversion project New coker unit (2 Mtpa) Conversion improvement of +32% FCC eq. to 63% Total investment 800 M (2007-2012) - Repsol Cartagena On stream: 4Q 2011 Repsol Bilbao On stream: 4Q 2011 - Conversion and expansion project Capacity increase of 120 kbpd to 220 kppd New hydrocracker (2.5 Mtpa) and new coker (3 Mtpa) Conversion improvement to +76% FCC eq. from 0% today (up to 92 % w/o Lubes) Total investment 3,200 M (2007-2012) Distillation capacity Middle distillates production Conversion (kbpd) +16% (2010 basis) (Equivalent FCC %) 890 +25% 770 +47% 125 63 100 43 2010 2012 2010 2012 2010 2012 From 2012 on, solid cash generation from premier integrated position in the European downstream 10
Strategic Plan Update Key Shareholdings - Key Operational Accomplishments to Date YPF Successful rebalancing of portfolio via partial divestment (99% stake in 2008, 57.43% as of today), cash from divestment: EUR 3,222 million Convergence into import parity supporting cash flow generation Ongoing successful oil reserve recovery Upside from unconventional resources i.e. Vacamuerta Dividends from 2008 until November 2011:US$ 5,349 million Capturing hidden value Gas Natural Fenosa Enhanced growth and value through UF acquisition with synergies delivery on track Strong cash generation and demonstrated earnings resilience Vertically integrated market leader in G&P 11
Strategic Plan Update Portfolio Rebalancing 1. Repsol Sinopec Brazil 2. YPF 7,111 Petersen 25.5% 11 Analysts Coverage 10,664 Repsol 57.4% Free Float 17.1% Average TP: 50.0 US$/ADR Value of Repsol's offer Sinopec s capital contribution 40% 7.111 M$ Repsol s value of its 60% participation in Repsol Brasil Between Feb 08 and Sep 11 Repsol has sold 41.6% of YPF generating ~EUR3.2bn 3. Non-integrated downstream assets REFAP (Brazil) CLH (Spain) Other minor divestments Cash from divestment ~ EUR1.1 bn The divestment of Repsol Brazilian Assets and YPF and other non-integrated downstream assets have contributed a very positive effect on the company liquidity position and financial ratios 12
Agenda Introduction Strategic Plan Update and Key Accomplishments Financial Overview Conclusions 13
Financial Overview Balance Sheet Overview Repsol Group figures Million Euro Dec 2009 Dec 2010 Sep 2011 Goodwill 4,733 4,617 4,547 Property, plant and equipment 31,900 33,585 34,360 Current assets 14,773 21,878 21,458 Total Assets 58,083 67,631 68,690 Total Equity 21,391 25,986 29,264 Non-current financial liabilities 15,411 14,940 14,530 Current liabilities 11,993 15,773 14,525 Total Liabilities 58,083 67,631 68,690 Solid and robust balance sheet, increasing assets vs. decreasing financial liabilities 14
Financial Overview Financial Highlights Repsol Group figures Million Euro Sep 2010 Sep 2010 Sep 2011 Capitalization (1) 27,549 EBITDA 7,067 6,683 Capital Employed (2) 34,697 EBIT 4,060 4,102 Net Debt (2) 2,909 Net Income 1,786 1,901 (2) Preferred Shares 3,002 CCS Adj. Net Income 1,533 1,568 Equity (2) 28,786 Investments 3,384 4,273 (1) As of 2 December 2011; (2) Repsol EX-GN figures Net Income increased by 6.4% with investments of EUR 4,273 million Sound financial position reflected by a Net Debt / Capital Employed ratio of 8.4% 15
Financial Overview Credit Ratios Repsol EX-GN Million Euro Net Debt Sep 2010 5,504 Sep 2011 2,909 Capital Employed 31,618 34,697 Net Debt / Capital Employed % 17.4% 8.4% EBITDA 5,981 5,606 EBITDA / Net Debt 1.4 2.6 Net Interest 191 120 Net Interest + Dividends Preferred Shares 281 201 EBITDA / Net Interest EBITDA / Net Interest + Dividends Preferred Shares 31.3 21.3 46.5 28.0 Deleverage and increase in debt coverage ratios mainly due to significant net debt reduction 16
Financial Overview Gross Debt and Liquidity Analysis as of 30 Sep 2011 Gross Debt Repsol EX - GN Million Euro Capital Markets 5,651 Bank Loans 2,063 Institutional Finance 576 Credits 247 Project Finance 450 Others 116 Total Gross Debt 9,103 External Financing available EX - GN Million Euro Cash and Equivalents 3,917 Total Commited Credit Lines 4,941 Long term 3,236 Short term (<12 months) 1,705 Credit Lines Utilization (247) Total liquidity available 8,611 Long Term Financial Investments* 2,277 Liquidity+ Financial Investments 10,888 September 2011 15% 23% 62% Capital Markets Banks Others Capital Markets represent 62% of gross debt, with a low dependance of banks (23%) Outstanding level of liquidity * Financial Investments mainly corresponds to Petersen, Hunt, Atlantic and OCP Ecuador 17
Financial Overview Repsol YPF EX GN Debt Maturity Profile as of 30 Sep 2011 Million Euro 2500 2000 YPF Capital Markets Repsol EX-GN Repsol EX-GN 1500 1000 500 0 4T 2011 2012 2013 2014 2015 2016 2017 >2018 Group 4Q 2011 2012 2013 2014 2015 2016 2017 >2018 (1) Repsol EX-GN 455 156 267 160 110 76 76 547 (2) (3) Capital Markets 790 794 1.018 1.996 0 0 881 0 YPF 501 789 308 77 20 19 0 68 Total 1.746 1.739 1.593 2.233 130 95 957 614 Repsol EX-GN has limited refinancing risk thanks to well-spread debt maturities mainly in the Capital Markets (1) Excluding Capital Markets; (2) Capital Markets Repsol EX-GN, (3) ECP 18
Financial Overview Financial Strategy Conservative and prudent financial discipline: Increase in available liquidity by increasing long-term credit lines and cash generated by portfolio divestments. Limited refinancing risk due to well spread debt maturities and available cash. Repsol s maturities until 2015 already pre-financed with available cash and undrawn credit lines. Short-term debt is 2.6 times covered by available liquidity. Available liquidity represents 94.6% of gross debt. Diversification of funding allows Repsol to isolate itself from turmoil in the banking sector: Repsol s primary external financing comes from the capital markets, which provide 62% of the gross debt of Repsol and controlled subsidiaries. 19
Key Credit Strengths Rating Agencies are recognising strong credit metrics as well as the implementation of its Strategic Plan S&P (BBB) Positive Solid domestic downstream operations (refining and marketing). Cost-competitive production operations in Argentina, North Africa, and Trinidad and Tobago Prudent liquidity management Enhanced upstream position with strong production growth potential and prospects for robust reserve replacements ratings reflect its very solid domestic downstream operations, adequate liquidity, continually strong dividends from now 68%-owned YPF S.A. and moderate financial policies (As of March 2011) Moody s (Baa1) Stable Strong downstream presence in Spain, Portugal and Peru, underpinned by its integrated refining and marketing network and leading market share. Successful exploration efforts, which led to major discoveries in areas such us Latin America (particularly offshore Brazil), North Africa and the Gulf of Mexico Progress made by the group in executing some of its portfolio management initiatives set out in the Strategic Plan 2010-2014, as it seeks to further rebalance its portfolio towards its integrated core businesses Prudent financial policies and robust liquidity main competitive advantage to lie in its downstream business, specially in Spain. Its integrated business model allows the company to actively market refined products and LPG, and maintain a positive sales margin even in a lower price environment Fitch (BBB+) Stable Repsol s strong liquidity for the next 18 months even under a stress scenario Resilient integrated downstream business model Brazil transaction positive for Repsol s creditworthiness, as it pre-fund its main upstream projects for the 2011-2014 with no additional debt rating is underpinned by its rejuvenated upstream portfolio, leading regional downstream position as well as of a fairly conservative financial framework 20
Agenda Introduction Strategic Plan Update and Key Accomplishments Financial Overview Conclusions 21
Conclusions Investment Highlights Repsol is delivering on the execution of its strategic plan, showing growth in upstream projects, completing refinery investments and generating solid operating results in YPF. As a consequence, under the present scenario, internal cash flow generation will allow Repsol to finance organic capex, pay dividends and cover debt maturities. We continue to maintain a solid financial position with strong liquidity of EUR 8.61 billion representing 94.6% of gross debt. This liquidity covers 2.6 times short term debt. Repsol has low refinancing risk due to a wide spread of debt maturities and cash flow generation. Our conservative strategy is to maintain enough cash to service short-term debt, fund our growth in upstream, and diversify our portfolio in OECD countries. Repsol s metrics places it closer to the rating category "A than its actual ratings. Repsol has become a more diversified integrated oil company, positioned to generate growth in the most attractive markets. 22
Repsol Credit Update Presentation to Fixed Income Investors December 2011