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Executives

Maria Victoria Zingoni – Managing Director, IR

Miguel Martínez – CFO

Analysts

Haythem Rashed – Morgan Stanley

Bruno Silva – BPI

Filipe Rosa – Banco Espirito

Theepan Jothilingam – Nomura International

Lydia Rainforth – Barclays

Alastair Syme – Citi

Mark Bloomfield – Deutsche Bank

Peter Hutton – Royal Bank of Canada

Daniel Ekstein – UBS

Iain Pyle – Sanford Bernstein

Marc Kofler – Macquarie

Thomas Adolff – Credit Suisse

Henry Morris – Goldman Sachs

Jason Kenney – Santander

Luis de Toledo – BBVA

Maria Victoria Zingoni

Repsol Ypf S.A. (OTCQX:REPYY) Q2 2012 Earnings Call July 26, 2012 6:30 AM ET

Operator

Good morning, ladies and gentlemen. Thank you for standing by, and welcome to Repsol Second Quarter 2012 Results Presentation. This conference call will be lead by Mr. Miguel Martínez, CFO of the company.

(Operator Instructions)

I will first pass the floor to Ms. Maria Victoria Zingoni, Investor Relations Managing Director that she will make a brief introduction. Maria Victoria, please go ahead.

Maria Victoria Zingoni

Good day, ladies and gentlemen. This is Maria Victoria Zingoni, Director of Investor Relations at Repsol. On behalf of our company, I’d like to thank you today for taking the time to attend this conference call on Repsol’s second quarter results.

The presentation as I said will be conducted by Mr. Miguel Martínez, CFO; other members of the Executive Committee will be joining us as well.

After the speech, we will have a Q&A session. Before we start, I invite you to read our disclaimer note. We may make forward-looking statements, which are identified by the use of words such as will, expect, and similar phrases. Actual results may differ materially depending on a number of factors as indicated on the slide.

I now hand the conference over to Miguel.

Miguel Martínez

Thanks, Maria, and thank you all for attending this conference on our second quarter results. In today’s call, we will cover three topics. First we will give an update on the YPF expropriation on board. The status of the legal action and the accounting impact on the financial statements then we will explain the progress, we have made on the actions to strengthen the balance sheet. And finally, we’ll cover the quarterly results and current status of the operations.

Let us start with the update on the YPF situation by reviewing the progress on the legal matters. The legal actions are related both the 51% of the company subject to expropriation and already occupied by the Argentine government, and to the remaining stake held in YPF.

Repsol currently has the right to exercise both in concern so another powers pertaining to class these shares of YPF representing a 12% stake, which is composed of two parts 6.4%, which was part of the original 57.4 we own, and was not subject to expropriation.

And then additional 5.4% further which we have those power, as a result of the early termination of the loan agreement with the Petersen Group. And Repsol rights on the collateral of that loan agreement, according to the terms of the collateral pledge. The other shares belonging to the Petersen Group are now in the hands of the bank or institutions, which were part of the loan to Petersen at the time of expropriation among them we find the companies of the (inaudible) Brazilian Group or Banco Itau, which are not shareholders of YPF as the result of the exercise of their collateral rates. The most relevant legal steps taken by Repsol include the following.

Repsol notified the Argentina state of the controversy resulting from a breach of the agreement for the promotion and protection of investments between Spain and Argentina, and its intention to file for international arbitration of the international center for settlement of investment disputes exit.

Second, Repsol file a claim of unconstitutionality against the temporary occupation of the shares of YPF subject to expropriation. Third, Repsol launch a class action lawsuit in New York, jointly with Texas Yale Corporation for the part of its stake in YPF through ADRs not subject to expropriation against the Argentina state for breaching its obligation to file a tender offer in the event of gaining control of YPF in accordance with the provisions of Sections 7 and 28 of YPF articles of association as approved in 1993.

Portion to the legal regulation on the appreciation of YPF. The class action lawsuit also includes the protection of all the ADRs held by the Petersen Group on that date and held in favor of Repsol as a pledge for its loan to the Petersen Group.

Those rules were very clear of the procedures to be followed in case and entity wanted to game control over YPF. These procedures were followed by Repsol during 1999, when we acquired YPF. The government has failed to comply with the obligation to launch a tender offer to allow the shareholders to decide, if they want to remain in spite of the company with our new shareholder in control, a basic rights, which is recognized in similar transactions all over the world.

In summary, Repsol that has always been open to a negotiator solution for the issues facing in the Argentine energy sectors has been forced to-date all our prepared legal actions in defense of its rights has an extra bit in party. Even again those who may attend to take a fair advantage open on our local discussion. As current shareholder of YPF, Repsol also will require full transparency professionalism and rigor in the management of a private company that is listed in New York and in Buenos Aires.

To penalize our update on YPF, we will explain the accounting of the expropriation, the fact, which affects our financial situation is the change of control, due to the unlawful taking of YPF’s management and assets by the Argentine government. The accounting is as follows. First the consolidation of YPF, which is the write-off of the related assets liability, minority interest and translation differences for an amount of €4.7 billion.

Second write-off of all the loans related to the Petersen Group, net of the value of the 5.4% claim as collateral for an amount of €1.4 billion. Additionally, we have recognized a provision of an amount of €54 million because of the guarantees granted to Petersen Group. Third registration of YPF shares that remain our property as financial in business for sale at their fair value.

For those shares not subject to expropriation that is 6.4%, fair value has been calculated according to quoted prices in the market. For the 51 stake subject to expropriation fair value should be among the group expects finally and effectively to receive as a result of the expropriation process.

Considering those values (inaudible) which the relevant bodies and cost resolving the price or compensation were lifted through the expropriation process would reasonably apply. (inaudible) mentioned of the recoverable due entails uncertainty not only related to the amount but also to the time and terms of payment.

For those reasons even though Repsol considers a very sound and clear legal grounds to be compensated with the market value of the shares subject to expropriation determined by the valuation criteria usually applied by the financial community and the value determined by YPF by law is clear and objected and also consistent with those methods and lead to a value of $18.3 billion, we have chosen to be more prudent $14 billion valuation for the 100% of the company.

As a result of this the 51% of the shares subject to expropriation €5.3 billion for 6.4 of our current holding has been registered for a total amount of €5.6 billion, the net effect on the P&L of the abovementioned account plus a deferred tax assets of €524 million results in an accounting loss of €38 million. As explained in our strategic plan presentation, we are considering various actions in order to strengthen our balance sheet. Let me provide you an update of the implementation of the concrete actions taken so far.

First, we have successfully finished the script dividend program for the complimentary dividend of 2011, the acceptance reached 63.6%. Remember that our initial estimates was approximately 50%. Second with the respect to the asset disposal program, we have sold our OPU operations in Chile for $540 million in July, this transaction along with the sale of the 5% treasury stock in January 2012 amounts to €1.8 billion delivered out of the €4.5 billion we have announced as an objective for the five year duration of a strategic plan. We continue to actively work on the main alternatives to reduce that and improve the financial ratios, and cash position in accordance with our strategic plan and our discussions with the rating agencies. It’s important to point out that both preferential comparison and the asset disposal process have been handled simultaneously.

However the disposal of the LNG business should not only reduce our debt, but also increased our cash position and will not have a dilutive effect. Therefore the sale of our LNG business is our first choice. However we will continue working in parallel with these two alternatives to minimize the risks and not obtaining the required ratio levels.

Going into our liquidity position, at the end of the quarter we have €2.6 billion of cash and €4.7 billion of committed undrawn credit bank lines, covering our short-term maturities 4.4 times. We have executed separate share forward and shares swapped on sections with the financial institutions for a total amount of €1 billion using a 10.4% of our staking as natural as collateral. Without any transmission of the shares nor any limitation to our political or economic rights and obtain very competitive terms.

These transaction demonstrates our access to the financial markets and allow us to have alternative ways of funding in lieu of the reduction of our EPC outstanding and ensure we keep our liquidity position at the comfortable level in a tough financial – financing environment.

Let’s move now to the results and as presented on the first quarter results, all numbers exclude YPF and Repsol YPF Gas.

During the second quarter CCS adjusted net income was €481 million and CCS adjusted operating income was €936 million, this results were 27% and 34% higher respectively than during the same period last year.

The good results have been driven by the performance of our upstream and LNG divisions. In the upstream front, the adjusted operating income was €518 million, 77% higher than during the same period last year. The return to pre-conflict levels in the Libyan output and the revenues on gas realization price increase by the startup of the Margarita project have been the main drivers of the good results partially offset by the amortization of the unsuccessful exploratory well mainly Cuba.

In the LNG division, better margins resulted in an adjusted operating income of €78 million, 47% better than during the same period last year. The increase was due to higher commercialization margins. The results were lower than the previous quarter, because of the seasonality effect mainly in our North American operations.

In the downstream business, the CCS adjusted operating income was €205 million, 5% lower than in the second quarter of 2011. The improvement in refining margins and the increase in refined volumes could not offset the decline of the petrochemical product demand, and the lower sales volumes of tariff retail of the market division.

The utilization rate of the refining system was 68% versus 70% in the same period in 2011. The localization rates of our units was a consequence of shutdowns due to maintenance in the Puertollano and La Coruna refineries a catalyst change process in the Tarragona hydrocracker and the rebump of the Petronor refinery visbreaker, Cartagena’s new hydrogen and hydrocracker plants also have sure shutdowns due to mechanical adjustments. On acquiring Iranian crude cause oil makes an operational changes in our refineries mainly in Petronor.

In Gas Natural, the adjusted operating income of €232 million was 23% higher than during the same period of last year. The good results at a consequence of higher margins in the natural gas businesses.

In financial expenses ex-gas natural during the quarter were €88 million, €32 million higher than the same period of last year. The increase is mainly due to the step up in the interest of the preference shares and the increasing gross debt due to the bonds issued in December 2011 and January 2012.

Let us now move to the operational performance behind the results. Production in the upstream division is in the quarter was 320,000 barrels of oil equivalent per day, 8% higher than during the second quarter of 2011. The main variations come from Libya, Bolivia and Trinidad and Tobago. In Libya, the production reached 47,000 barrels of oil per day, which we have reached pre-conflict petrol levels. In Bolivia production was 26,000 barrels per day, 24% higher than during the same period of last year, due to the start-up of Margarita phase 1. In Trinidad and Tobago, we were still affected by maintenance on the offshore platforms and in the Atlantic LNG trends and production reached 119,000 barrels of oil equivalent per day, 16% less than during the same period in 2011.

Since early July, production is at record levels of 350,000 barrels of oil equivalent per day, due to the recovery of Trinidad and Tobago. We expect to materialize other production from Kinteroni and Peru, Russia and Midcontinent in the U.S. in the second half of the year.

Let me now review the status of the main development projects. The Margarita field project is running properly, Phase 1 of the gas development projects start up in May increasing gas delivery up to 9 million cubic meters per day.

The second phase is on track to start up in fourth quarter 2013 and reach a capacity of 14 million cubic meters per day in 2014. In Peru, the Kinteroni project carries on as planned and we expect to reach first gas during the last quarter of 2012 with the gross production capacity of 5 million cubic meters per day plus associated liquids.

The Sapinhoá project before Guará is going as of schedule, we are currently the P3S well, handling two producing wells, P4 and P5. The installation of the gas pipeline is provision and we expect to receive the FPSO in December. In the international projects in Spain, we are working on the associate group and installation and the hook up to the cost of Lanka platform.

We expect to start production in October. Now let us review the status of the main exploratory activity. Unfortunately, our well in Cuba was dry and we will not undertake any more activity in the area, we have to suspend operations in the Jaguar well in Guyana, before reaching the main objective, because the pressure design limits for safe operations prevented for the drilling, due to the high pressures encountered considered the depth we have reached.

Samples of light oil will recover from sands above the primary objective, which is encouraging. We will be evaluating the information of the first well both for the aforementioned business of oil in some horizons and the knowledge we acquired about the pressure ramps in order to consider further exploratory work.

We are currently in operations in another four wells. Well, 21st block in Brazil (inaudible) in Bolivia and Shanghai in block 57 in Peru and just start a new non-operated well in Norway.

We are working on first doing on Shanghai due to the positive indications we have. We have been a special active during this quarter in seismic campaigns. We finished campaigns in Indonesia, Portugal and Alaska. And we start campaigns in Angola, Canada and Iraq.

We are including in our acreage acquisition, pending final rectification two new important areas Namibia and Bulgaria. In Namibia we have acquired a 44% working interest in blocks 1910A, 1911 and 2011A from Arcadia Petroleum.

In Bulgaria, we were aware the exploratory right in the Khan Asparuh block in the Black Sea, along with our partners, Repsol and OMV.

We have also been leaders in additional blocks in the Gulf of Mexico; these blocks are the result of a very selective bidding to balance the current tax rate we hold. We are also waiting for duplication from operators in our entry into the Peniche block in the Portuguese Atlantic deep-water offshore and also we are worried of offshore in Block 23(b) in Trinidad and Tobago.

As for the remainder of the year, we expect to finish around 12 wells. Seven new wells to be added with five that are operating. We also plan to finish testing two additional wells in Brazil and few wells will be slipping into 2013.

The total number of wells drilled in 2012 will reach 22. On the LNG front 575,000 million Btu per day, 2% more than during the same period last year. The plant delivered during the quarter, three out of 15 cargos for the Manzanillo plant in Mexico.

In Trinidad and Tobago deliveries were affected by maintenance on the (inaudible) platforms and on the Train 3 and 4. Production was 10% lower than during the same period of last year. We have successfully start our delivery of products for this year and we are delivering on the actions we had outlined on our strategic plan as essentially to fortify our balance sheet. We have good results with still being a solid pillar of the new stage of the company. And we will continue with our delivery of both operational and financial results in the future quarters.

I’ll now be pleased to answer any question you might wish to put forward.

Maria Victoria Zingoni

Ladies and gentlemen, the Q&A session starts now. (Operator Instructions). Thank you.

Question-and-Answer Session

Maria Victoria Zingoni

(Operator Instructions) I will start first with Morgan Stanley, he is Haythem, Haythem, please go ahead with your questions.

Haythem Rashed – Morgan Stanley

Thank you, Maria. Good afternoon everyone. Haythem Rashed from Morgan Stanley. I have three quick questions if I may. Firstly, just to come back on the financing plan and this sort of fuel approach to LNG assets plus the preference shares, I just wanted maybe if you could provide any updates particularly on the preference share sort of transaction any sort of updates in terms of timing, it is still sort of planned for sometime in for the late 3Q, early 4Q any sort of hurdles that needs to be overcome before we are at this stage and secondly just this sort of related to dry gas, on the LNG business given some indication around instead of preference for a sales there.

Given previously the comments about the synergies between gas and LNG as your view around gas not changed at all and since we lost both and would you be sort of more sort of willing since you do something around just take that now and given the sort of potential sales on the LNG side and my third question is just on the downstream environment just get your view on the outlook for the second half of this year, and specifically well as how the upgrade impact is coming through on the numbers and where you are in relation to sort of the $2 to $3 positive impact from the (inaudible) upgrades? Thank you.

Miguel Martínez

Hi, Jason. Well, in relation with the first one, I mean the – all the measures we’ve presented to the agency are send through the market. We have to handle those in parallel, I think it’s important to realize those that has already being conclude this group will better result unexpected, the gain over liquidity through the prepaid forward, also the sale of the Chilean LPE and unless we work them in parallel. So it’s difficult to assess any detail about the preference and the combustion and whether it would be combustion or not because we have to consider this quite cautiously.

So we have to see how the LNG process go on and then take decisions about the preps and we will keep advancing and in that sense we have the authorization of the Board to keep moving with the preference shares, though the final decision and the end of the process, its linked through the LNG process, so difficult to assess now any detail about the conversion of the preps. In relation with the second one outside that before analyzing that neutrality, we are able to sell the LNG. So for sure, it will imply many things but let’s go step by step and we’ll have to think about our situations if the LNG sale goes ahead.

Finally (inaudible) for the refining in Europe has not modified substantially, I think that Europe is longing, approximately 3 million barrels of distillation capacity. So basically, worries about the area in the following months till the year end. I think that the solution will never come by the demand, so some of the distillation capacity to be outside competitive to logistic terminals or shutdown.

Having said so, in relation with the Spain, first that we have for the quarter is $1 per barrel, which is below the first the range we provide the market, which was become $2 and $3, enable us a little lower than in the first quarter. The reasons for that is the outage basically that during April and May that these (inaudible) has not worked at its efficiency or to entailments, with the revamping situation and the existing situation right now is that we are improving these $1 per barrel, approximately today we are at $1.6, $1.7 above improving. And outside that in the second part of the year in equal conditions, we will improve the results in our refining division.

Basically, you have to think that it is not easy to adopt a refinery aspect I think that was good hydroskimming into one of the more competitive finders in Europe for a step. Second in relation with Bilbao part of the issue of the risk breaker, you have to think that the change in diet, in the diet closing the Iranian Oils and moving into all the type of oils, which are needing more hydrogen between many other things, people need to adapt and need to know what are behavior of this new diet, we are imposing. So I think that by the year end, we will be able to reach the range between these $2 and $3. Did I answer your question?

Haythem Rashed – Morgan Stanley

Great, yeah, that’s very helpful. Thank you.

Miguel Martínez

Thank you.

Maria Victoria Zingoni

And thank you, Haythem. We’ll have the next question from BPI, Bruno Silva. Bruno, good afternoon.

Bruno Silva – BPI

Hello good afternoon everyone, thank you for taking my question. I would start with today’s news, if you don’t mind on Peru, if you could add more color on, let’s claim from Peru regarding the (inaudible) liquids or gas in U.S. I guess, and the potential cancellation of any thoughts of you may have in the basin, I’m not entirely sure of what were the details of that news.

And just I can go back first the follow up on the conversion of preference shares, you have been in intensive road show with investors. I just wonder, if you have some sensitivity to share regarding those investors in the pref shares regarding, what would be the acceptable conditions to convert in terms of potential difficult to price value and what kind of incentives would we require to convert in to common shares?

And the final question, and if I may is regarding downstream and you have been repeatedly booking resilient margins in the marketing fee unit in the context of very aggressive demand fall and most likely competitions should be increasing from your – from your peers in Liberia. Just wonder up I can go and what I expect we’re doing to sustain this kind of margins, and if you can give us any sort of number, target number for the full year, I would appreciate. Thank you very much.

Miguel Martínez

Okay. Thanks for the questions, Bruno. In relation with the first one, I think it’s a managed school. Yeah, I mean it’s a minimum issue. I mean, we are talking, totaling, I think about $50 million or something like that from which our portion is a 10%. So I think that the issue to point out or give you some color, is approximately $1 million. So I mean no big deal.

In relation with the preference and the conditions, I think that every shareholder or every investor, for sure, is concerned about the illusion and that’s the reason why we have to check first the LNG business is going to evolve and which will be the impact because things at the LNG under the agencies concept that implies debt of €4 billion. So it will have a massive impact on the considerations of the agencies. So, I cannot go any forward because first we have to check the evolution of the LNG process and then we will analyze the press. It’s important to keep those projects in parallel because one thing is important, I mean what we can see there totally necessary to give the investment grade. So we will see, but I cannot be more clear, okay.

Bruno Silva – BPI

If you don’t mind, a very quick follow-up on that one. You have commented in the strategic presentation and the potential level and what that’s going to be is related to both discrete and preference shares and regarding the net are you changing DDR sensitivity on the potential levels in change since then?

Miguel Martínez

I mean dilution itself is a great answer because we can’t talk about dilution in number of shares, dilution in BPA and PPS profit per share and so it’s not that clear when Antonio gave the figure it was a figure, it’s not that we are modifying anything I mean it also depends on which is the value of the share at the given moment so there is many factors and the mainly important thing is that till now and you have seen in all the acts we have been going on and trying to extend the balance is that we have been rational and we have tried to do our job properly in order to maintain the investment grade and we will continue to do so.

So, let’s analyze first how the LNG goes in parallel, let’s keep working to have everything ready, if a conversion or if a optionally is to be given to the tenants of the preference shares and we will see afterwards, but I cannot advance anymore than that, I mean we are working in both areas and we will see at the end, which is the best for our shareholders and for the company.

And finally, in relation with marketing margins, I mean the – we get our market quota and we get good margins. So I don’t see this type of pressure, thing that the margin should (inaudible) we are talking $2.6 of euro per liter and I expect to the area to be keep quite similar to the results they obtain last year. So I keep thinking that the resilience of our marketing is enormous and the results are there, okay.

Bruno Silva – BPI

Okay. Thank you very much.

Maria Victoria Zingoni

We have our next question from Banco Espirito Santo with Filipe Rosa. Filipe please go ahead with your questions.

Filipe Rosa – Banco Espirito

Hi, good afternoon everyone. Two questions if I may. The first one, on going back to the refining business, I was just wondering that there has been a huge improvement in the refining margin reported by Repsol year-on-year it can from $2.1 to $4.7 quarter-on-quarter from $3 to $4.7. However, (inaudible) in terms of EBIT has been quite limited. I believe that your guidance is still for each one additional dollar to add roughly $100 million to EBIT, but this has been quite disappointing in terms of the past two quarters. Could you explain what, what is happening and whether this could be solved in the near future?

And the second question relates to the exploration activity, you have significantly held on your exploration plans, how do you see I believe that you plan to drill around 30 wells in the beginning of the year. Now we are talking about 22, I believe so what you – what have been the main drivers for us such as significant delay, thank you very much.

Miguel Martínez

But you have to consider in the EBIT the impact of the stock, I mean during the quarter it was $350 million of impact in the inventory losses in comparison with last year. The second point is that we calculate the index base on the maintenance throughout the year. And within this quarter, we have four maintenance for La Coruna and for Puertollano.

So basically the semester has suffered the whole maintenance for the whole year. And I think that this what really explains the variance. Also, keep in mind that in comparison with last year we have an extra depreciation due to the new facilities, (inaudible) and I think that if you combine the few factors, the inventories, the increase in depreciation and the fact that we have the maintenance within this quarter while being this is considered all throughout the year, you get that point.

And in relation with a number of wells that we are going to drill, there has been delays and the most of it has been, first, in prospect that we are not the operators as fact increase, modifies from December to January. So it’s not being delayed, though in the head count of the year, makes a number. And also it’s important to note that within this study there were eight wells to be drilled in Libya, but we have reduced the figure to two wells and we delayed the process through 2015. So, basically it’s Libya, some delayed for months. So, I mean no change in our business model.

Filipe Rosa – Banco Espirito

Thank you very much.

Miguel Martínez

Thank you, Filipe.

Maria Victoria Zingoni

We have next question from Nomura International with Theepan Jothilingam. Theepan, please go ahead with your questions.

Theepan Jothilingam – Nomura International

Yeah, hi good afternoon. Thank you for taking the questions. Miguel, just coming back to the LNG business, I just want to understand in terms of a sale process would you consider a (inaudible) within the LNG business and could you just remind us where some of that off balance sheet lies between the asset? Then secondly, on production, could you perhaps give us any guidance on what you think the exit rate on production may be for 2012.

And then lastly just on Jaguar, I assume you may right of the cost of that well into the coming quarters. If that’s right could you tell us what you may write off?

Miguel Martínez

Good morning, Stephen. In relation with the LNG are reduced to sell it of the block, we don’t want (inaudible) would be a single transaction at least initially. And in relation with what is the balance that is basically refers to all the leases of the rating agencies considering that basically we are looking about of 14 tankers and all the pipelines across the U.S. and Canada which accounts for two billion. So basically the debt we have is $1 billion in our balance sheet and the agencies accounted debt for 4 billion (inaudible) that I mentioned. The second half today to give you any idea for the year production and I am always wrong with my productions on, but I think that if you take 330,000 barrels per day on a yearly basis, you will be close.

And finally in (inaudible) well what’s finishing July and would be accrued or write-off in the third quarter of this year. And we still have to analyze all the new information of the well to look forward to deal another one, also having say something that the impact on our P&L is not going to be that big as far as say 15%. Okay?

Theepan Jothilingam – Nomura International

Okay, perfect and I mean coming back to the LNG business, I know it’s early days but have you had, can you indicate any level of interest in that that you’ve had so far in that business?

Miguel Martínez

No, I can tell you that we have a strong team in our side with the Government Boston Consulting Group, (inaudible) we have also I think is Deloitte of KPMG, so we have all the group working and we have already received interest from more than 10 companies. So we will see how it evolves but our ideas as mentioned to move it fast in order to have more possibilities to in front of the agents and see whether or not we need to go for extra measures as the one, we mentioned in our results. Thanks, Theepan.

Theepan Jothilingam – Nomura International

Thank you.

Maria Victoria Zingoni

We have the next question from Barclays with Lydia Rainforth. Lydia, please go ahead.

Lydia Rainforth – Barclays

Thanks. First good afternoon to all. A couple of questions if I could. First one, just on the working capital side, I’m clear that it’s quite a good ways of working capital from the quarter. Can you just talk about how you expect that to be for the rest of the year? And then secondly, if I come back to the LNG and the preference shares issue, clearly selling the LNG was not part of the original plan from the strategic side and I just want to understand that if there is a maximum level of dilution that you would look out for being successful, through issuing the preference shares and the other day, we haven’t talked about is the sale of the treasury shares and why you can’t extend or not issue as well? Thank you.

Miguel Martínez

Frankly, yes. In relation with and congratulations for your promotion, okay.

Lydia Rainforth – Barclays

Thank you.

Miguel Martínez

First one, in relation with the working capital I think we improved this year I mean this quarter, approximately for 400 million; reason for that basically the price of the oil, so and my estimate is that by the year-end, in equal terms from the beginning of the year, we should be reducing our working capital between €200 million and €300 million.

In relation with the LNG and press, now we don’t have a magic figure I mean, we have to keep working advancing first the LNG process to see where we are and then we will take the decision. One thing is clear, we have to keep the investment grades and we will look at the – first at the results of the LNG and if necessary we will go with preference shares. So we get with both processing parallel and we will see, I mean in today’s financial markets and in today’s I mean volatilities the name of the game, so it’s quite difficult assess what is going to happen in two weeks. So we will keep working on the LNG and then we will take our decisions. This is what I can tell you and final question was can you repeat it Lydia?

Lydia Rainforth – Barclays

Fees that’s around the treasury shares.

Miguel Martínez

Oh, yeah, yeah sorry. To me the treasury share is somehow we would legalize Board to keep doing (inaudible) I mean I think that it would be a very bad signal to the market that we show our shares at these price, which in my perception are ridiculous.

Lydia Rainforth – Barclays

Okay. Thank you very much, Miguel

Maria Victoria Zingoni

Thank you, Lydia.

Maria Victoria Zingoni

We have next question from Citi with Alastair Syme. Alastair, good morning.

Alastair Syme – Citi

Yeah, hi everyone, in the risk of laboring the same point. Just on the LNG, can I just clarify whether this is an either all with the preference shares or would there be a scenario where you might consider doing the both, and I know you’ve talked in the past about trying to provide some liquidity to preference shareholders? Secondly, can I just ask I know it’s not your company, but what your thoughts are on the severe situation given that you have participated in the past? And thirdly, just to clarify on the Peru LNG cargos, that you send away, where is the tax liability paid on those arbitrage cargos, is it paid improve or is it paid by over reps or somewhere else? Thank you.

Miguel Martínez

Thanks, Alastair, I mean collision with the LNG I mean the priority is to keep the investment grade. We are going to move faster with the LNG and in parallel with the pref shares. If the LNG give us enough room to working with the agencies, fine a status in which the investment grade plus and is not in danger, then we will look for a resolution for the pref shares totally different from capital, I mean there are other formulas that can solve the situation of liquidity of the preference shares not being capital.

But having said so, I need first to know how the LNG process is going ahead. So I will solve both issues, but once I mean I need a viable to resolve produce how the LNG and how the agencies will analyze the company once the LNG itself. Also I think, it is important to mention and when we took out our LNG, we are talking about the upstream assets linked to the LNG. Okay. So basically for stability of the LNG works then let’s solve the problem of the preference shares, if the rating agencies give us comforts and we know that we can keep the investment grades. Then – I mean their formulas to provide liquidity to the tenants of the preference shares, not affecting the capital let’s say hybrids or many other options. That I cannot give you more flavor today, because first I need to know how we are used to, where we at once and we’ll move into the LNG process.

In relation with SAFIER, well, not much – I mean, I don’t have anything to say on that and finally in Peru basically the royalties are logically paid in Peru and those royalties are dependent on the price but the LNG breaches. Basically depending on the destination, whether it is Europe, U.S. or Far East, so it is an issue of royalties and as mentioned in, and I think it was Bruno, I think that the major impact for us would be around $1 million or something like that, okay.

Miguel Martínez

Okay. Thank you very much.

Maria Victoria Zingoni

Thank you. We have our next question Mark Bloomfield from Deutsche Bank. Mark, please go ahead with your question.

Mark Bloomfield – Deutsche Bank

Good afternoon. Thanks for taking for questions. Yes, I’m sorry (inaudible) the LNG business but just a quick question on timing, you have indicated that you would like to do the preference redemption in October, all other things being equal of course assuming you have not complete the LNG, so by that point in time you’re fairly confident of doing so, exactly in the next two to three months. Have you had conversations with rating agencies about potentially deferring the conversion of press today, late this year going into next year, so how would they give you a period of growth to do so?

And the second question is just on your divestments target, you obviously outlined the target of the strategic plan. You have talked about looking at the LNG assets you’ve obviously sold the LPG assets in Chile. Are there any additional assets that you’re looking at selling and if so could you perhaps give us some sense of scale and timing?

And then the final question is just on CapEx. I think year-to-date CapEx is coming in at around €1.5 billion, (inaudible) the full year target is around €4 billion, run rate looks a big light, could you give us some indication for the €4 billion targets that are valid or have you been able to make some savings on the CapEx front? Thanks

Miguel Martínez

In relation with the first one. I’d say that we are in permanent contract with the agency, so with one of them, for example, we have already talked about this – this issue. And I think the time is there, I think what is important for the agencies – is to see the direction in which we are moving. And in that sense, I would say that at least the last meeting we had, I ended it up quite optimistic, basically the (inaudible) was there, the initial of the divestments was there. We gain liquidity, so basically is not a fixed rate, I think that if by September, we will have a lot of flavor about how the LNG process we’re go, and then we will sit with the agencies. I mean and one as we speak with them, we’d realize whether or not we have to move in one direction or the other and which is what I can tell you.

In relation with other divestments, I don’t see any major one. There would be a small non-significant ones, but not any major one before the year end. And finally with the CapEx, I don’t know how it happened, but it’s always more lower in the second part of the year. Without Gas Nat our estimate was €3.5 billion and we are right now at €1.5 billion. So we have €200 million below which is not flat. So I think we will end it up in the field. We gave as indication for the whole year which is 3.5 without Gas Nat or €4 billion with Gas. Okay, Mark.

Mark Bloomfield – Deutsche Bank

Perfect, thank you.

Operator

Thank you, Mark. We have now Peter Hutton from Royal Bank of Canada. Peter, please go ahead with your questions.

Peter Hutton – Royal Bank of Canada

Good afternoon everybody. And Miguel, I am just wondering how many questions you are going to get on the LNG and the press. I got one more and then on to development and exploration, so it’s not just as focus.

But those one areas that I can ask about, it’s exactly at about winning of these element in parallel, but you mentioned that the selling of the treasury shares would be the last bullet, and when you mentioned about just holding in gas net would that be a median bullet in between or is that no bullet at the moment when you, if there is any delay on LNG?

The second question is just a little bit more on the timing that you mentioned on Sapinhoá and you said that you’re drilling wells four and five. Just what the lead time on that is and when that will start to connect in line with the FPSO upon fully starting up on first oil next year, and the third one Namibia and the action plan that you have the three blocks of 44% off and then may be where do you got from there and what’s the kind of indication on when you would assess drilling the well locations and access to rigs?

Miguel Martínez

I don’t know, if I have more bullets or not. But my perception is that, I know that I think it’s important it is all that it’s something that we always transmit to the rating agencies, I mean we have a lot of optionality, and lot of them both within liquidity and to improve the balance, and we have to pay those in what we think is the best for our shareholder. So at the given moment it’s necessary to put the gas natural on in the table. We will have to – we will analyze it as any other optionality? it is not in the plan today?

Miguel Martínez

In the front we have LNG and the press, but the breaking news what really concern us and in relation with (inaudible) I think that the number for SP number for and will be mid-year within I’d say three months – within three months they would be there. In terms information that the last development well we drilled, was drilled in 43 days, which has been the best performance to total debt so far in the retail SandRidge. And in relation with, I mean this deal, so before 2014 we should not expect any news from Namibia, it will be more internal works. In 2014 Namibia would be I would say also (inaudible), okay.

Peter Hutton – Royal Bank of Canada

Perfect, thank you very much.

Maria Victoria Zingoni

Thank you Peter for your questions. We now have from UBS, Daniel Ekstein. Daniel, good morning and please go ahead with your questions.

Daniel Ekstein – UBS

Thanks Mary. Good morning everyone. Couple of questions; firstly, on the credit rating and it’s a question on how seriously you perceive the risk that you could or your rating could be effected based on the position of the Spanish sovereign in the near-term, I know one of the agencies recently done great as your outlook based not on the company specific issues, but on the software issues, so I guess the question will be in the near-term is your fate entirely in your hands, do you think, could you elaborate on the dialog you had there?

And secondly on refining, just to get a bit more detail. And this was clearly not a right ago quarter in refining due to the heavy maintenance activities that were going on. Could you tell us how costs in this quarter for refining are they are on a per barrel basis or an absolute number would come back to a more normal quarter without the maintenance and with high utilization. Thanks.

Miguel Martínez

In relation with the first one, we will see I mean for share (inaudible) and we would be partially affected if not totally affected, but really have to see I mean what we can share based in terms of balance it is limit and at the end we have five activity and important one which is outside Spain, first point. Second our liquidity position is quite strong.

Third, I would say that our relation with the banks is quite reduced only approximately an 18% of our debt is with banks. So even if the banking system is affected, it would only affect us partially. And we have basically this relation with the banks outside of Spain, so we will have to see and see how the agency is react, but I mean we’re trying to do our best to strength the balance.

We’ve started last year resulting and it’s an important issue, I mean remember that we issued bonds in December last year. And in January one of them was 750 the other 850 and we have also are approximately 250 in the 2019 bond. So we are preparing and I think is the mission of the financial area to prepare the company for the worst and then let’s see what happen. And this is what we are doing, I cannot predict what is going to happen with the right of Kingdom of Spain, but at least we have to – to do our best even – ready for the worse situation.

In relation with the refining two – two factors to be mention. The first one, I’d say the maintenance costs were approximately €40 million, which is – also we consider that we – our distillation capacity has been working at 68% in comparison with – right now for accounts that we are at 80%.

You will have all the data, hopefully the other way around, if you want, basically in a normal year, we should produce approximately our (inaudible) approximately 290 million barrels, reduced 70 million barrels per quarter. So on average this is maintenance represents roughly 0.50. As we have been distillating only 50% as we account for little more let’s say $0.75, $0.80 of dollar per level.

Miguel Martínez

Okay, Daniel?

Daniel Ekstein – UBS

Well this €30 million you said for the...

Miguel Martínez

40.

Maria Victoria Zingoni

40.

Maria Victoria Zingoni

Thank you, Daniel. We have next question from Sanford Bernstein, Iain Pyle. Iain, please go ahead with your questions.

Iain Pyle – Sanford Bernstein

Good afternoon, yeah, thanks for taking my questions. I think most of my questions have been answered, but perhaps on the gas realizations given that the gas realization has moved up this quarter. I wonder, if you could give some more detail on the realization, you are seeing from Margarita. And secondly, I wonder if you can comment on the progress with the shale assets, we’re developing with SandRidge in the U.S. and particularly, given the low realizations we’re seeing in the states at the moment, whether that has any effect on the future development plans for that? Thank you.

Miguel Martínez

In relation with your first one, basically, Margarita make up some (inaudible) account for a 10% of the brand price and you will be quite close. So and as we reached plateau by the end of May, I think it was 27, I think that in the following quarters you will see a mixture increase in the gas realization prices well as Margarita produces for the whole quarter. So good news there, and in relation with the shale assets the impact would be minimum this year same that by the year and on average would be approximately around 2,000 barrels of oil equivalent per day with a 47% of between oil, so no major impact right now, we will keep drilling. We have right now 22 rigs operating and we keep confident that the price we have there is going to be a good one. And we expect to end up with more than 90 rigs and obtain the peak of production by 2019, 2020. So right now on more news there and for sure no impact at all within this year. Okay, Iain

Iain Pyle – Sanford Bernstein

Great, thank you.

Maria Victoria Zingoni

Thank you, Iain. We have now next question from (inaudible) Good afternoon.

Unidentified Analyst

Hi, hello, good afternoon. I have a few questions please, I’ll start with exploration, could you just talk a little about still alone in Namibia and what your forward trends are for the region given the recent well results. And then could you talk a little bit about what do you plan to do in terms of drilling activity, and exploration activity in Bulgaria? That’s on exploration. On refining, I just wanted to clarify few things. Could you just give us the OpEx per barrel for the quarter, as well as the premium that you achieved to Brent on a per barrel basis for the quarter?

Miguel Martínez

Starting with the exploration, I mean, we just enter I mean that mean – I think it’s in Bulgaria, we have not received the conformation of the award. We know the award, but – so basically, it would be to start and see in any other parts, I mean seismic works and there wouldn’t be any news field in 2014-2015 at the best. And in the OpEx I don’t have the figure with me, I don’t work with refining with OpEx per barrel but we’ll receive that through our INR people, okay.

Unidentified Analyst

And then clearly in Liberia.

Miguel Martínez

Yeah in Liberia I mean we have the disappointment of Mercury-2 and our people are analyzing and they are studying back all the registers we get from the wells both Mercury-1, Mercury-2, and they are selling it. So I know have any – any extra input to provide you, okay.

Unidentified Analyst

Okay, thank you.

Maria Victoria Zingoni

We have our next question Marc Kofler from Macquarie.

Marc Kofler – Macquarie

Hi to everyone, just two very quick questions please. Given the meeting parts around the exploration activity for this year, I am just wondering if there is any material updates in terms of the in terms of changes of exploration budget for this year and then also given some of the that expression to the team, previously comes in for this year’s meeting on to next. Just to kind of forecast that will, so with around that sort of €1 billion spends on the exploration next year. And then just taking very quickly, I think those some downtime trends during the third quarter, I am just wondering, if you have to quantify that? Thanks.

Miguel Martínez

In relation with the exploration project, no major changes, I mean seeing that the Libyan wells are really cheap we are talking $2 million, $3 million up to $5 million at the maximum for well. So no impact there and also those that as delay as mentioned before, we are approaching I believe from December to January, so within December there was no more any extra charge. So basically no change in the budget and in relation with the (inaudible) I think that our net loss was something as 1000 barrels that they’re doing for they so something like that so it was totally minor the impact of the hurricane, okay.

Marc Kofler – Macquarie

Okay, that’s great thanks very much.

Maria Victoria Zingoni

Thank you Mark. We have now Tom Adolff from Credit Suisse. Thomas, good morning.

Thomas Adolff – Credit Suisse

Good morning, thanks for taking my questions. Three sets of questions; the first on the transaction you did recently (inaudible) you got an uptick and obviously some other derivatives in stating that you kind of fetched out the guess not shale price risk, can you confirm that this is completely fully hedged out, so there is no risks too, let’s says if there is enough share prices for, that’s the first one?

The second one is on refining, obviously you just said utilization rates going up to 80%, but in view of the longer-term outlook for European demand and capacity being added elsewhere in the world, it’s kind of fair to assume that utilization rates in Europe will never really go up if anything they will continue to decline. Have you thought about any sort of closures or certain CDU units in one of your refineries like totaled it was Gonfreville or (inaudible) Fawley refinery, is that something you would consider doing and then its fine to be, just on Argentina I guess obviously you have to (inaudible) Argentina is ignoring that.

I was wondering with any other insurances in places like the lowest political risk insurance. And then also following on the recent comments by President Chavez pushing Repsol for friendly agreement was Argentina. Can you kind of update us on whether you’ve had any negotiations or any discussions or approaches with the Argentina in government. Thank you very much.

Miguel Martínez

No well deciding by the last five months, we didn’t have any contact from the Argentine for this and also one of our concern is refers to all the information that the company basically is not providing for the market. We think that there was I mean that would holding information. Having said so and in depth, they can include some of the stories we have read in the press, I am sorry, (inaudible) which were discovered several months ago.

And I think that several comments, we agree with it, I mean we would be really happy to really close at each I mean we have been able to negotiate with many governments. I mean we have – with it so in Bolivia, we saw in Ecuador, we did it in Libya, we did in the main Venezuela, so I think that’s Repsol has been totally open to a negotiation process.

And I think it’s a good idea, but that’s what service (inaudible) is mentioning, but we will receive this possibility, you have to keep moving in order to protect our shareholders, so and that’s it. In relation with Government, yes it is fully hedged, fully hedged. And finally, in relation with refining, as I mentioned, I agree with you that improvement of refining in Europe is not going to come by the demand side.

But we are not seeing any closing at all, I mean what we did in the past, and we finished last year, was to put all our refining system in the first quartile. So even if we have low margins, the rest, I mean our peers in Europe will be losing a fortune. So to me the final picture is that closings are needed. I know that in some countries this social impact is important, but at the end especially those that are not outside the companies, will not stand for long.

Look at Petroplast last year, you’ll see a lot of this, there is a lot of this small refineries in Europe, not integrated with low conversions, but I’m going to be the first victim, I mean there will be some logistic seminars short later and till then I mean at least we know that will be in the top quartile line obtaining positive results and positive cash. But I agree with you in your general view of our refining book, did I answer you everything.

Thomas Adolff – Credit Suisse

Yes. Thanks. If I can just have a quick follow-up on you can remind us on the maturity of committed undrawn credit facility, I think you mentioned it was €4.5 billion or so, if you can update on the maturity, thank you.

Miguel Martínez

In the maturity we only have short term approximately 1 billion. The rest is for 3.7 plus one, the other 3.7 long-term okay.

Thomas Adolff – Credit Suisse

Okay, thank you very much.

Miguel Martínez

Okay.

Maria Victoria Zingoni

Thank you too much. We now have from Goldman Sachs, Henry Morris. Henry please go ahead with your questions.

Henry Morris – Goldman Sachs

Hi everyone and thanks very much of behalf of taking my questions. I just got three quick questions please. First, in your discussions with the rating agencies, what’s the most important metric that they want you to meet in order to maintain your investment grade rating?

Second, can I just confirm what you said early on the call that the total debt that you can consolidate from the LNG business is €1 billion of straight net debts plus €3 billion of (inaudible) leases?

And thirdly just on Kinteroni, I know it’s still up in the fourth quarter of this year. Should I assume that towards the beginning of the quarter or the end of the quarter for first production? Thank you.

Miguel Martínez

I mean basically the rating agencies will look for this division, they put on top of it the cash flow to generate and but that cash flow with their considerations, I mean that is not the cash flow we normally use and as a dividend, I am sorry, I mean they divide that by the debt and in that debt it is not that way I used to, it’s also a type of debt they consider.

So in their metrics and with that, that will answer the second question. They will consider the leases and they calculate the present value of these leases and consider it as debt today. So in that sense, our LNG divisions has approximately €1 billion in debt and with the considerations of the agencies, they consider €4 billion and the difference distributions as of leases basically the tankers and the pipelines in Canada and in the U.S, okay. And in relation with Kinteroni, you will be – If I have to wait or go by the end of November.

Henry Morris – Goldman Sachs

Great, thanks very much and sorry just to – just to follow-up quickly on the LNG is it then your impression from rating agencies that if you were to sell this entire business. I mean obviously it depends on the price you get, but that would be enough to maintain the investment grade, and you therefore would need to compare the preference shares?

Miguel Martínez

I mean it is something we have to reach, we don’t know yet reached, it is going to be the (inaudible) to bank. But I think that the perspective from the rating agencies would be by far more positive, if we are able to sell the LNG, think that the equation it would and I’m talking and probably the EBITDA we are having the division is approximately monthly €600 billion, and if you divide that by the €4 billion they are considering as if you realize that the ratio is quite below what the agencies are asking for as investment grade. So, my perception is that it would be an important step to keep the investment grades.

Henry Morris – Goldman Sachs

That’s great, thanks very much.

Maria Victoria Zingoni

Thank you very much Henry for your questions. We have now from (inaudible). Please go ahead.

Henry Morris – Goldman Sachs

All right. Good afternoon. I have two questions please. So, first of all turn back to YPF, you are carrying €5.6 billion as the net book value clearly the credit agencies would assume that is zero. You’ve already return of the Petersen Group loans, I mean do you anticipate a time when you might take a write off on that YPF value and related to that, is there any timeframe for when you may change accounting on that away from consolidation to equity accounting?

And my second question just it’s been, which you discussed at (inaudible) can you perceive that the side of the credit agencies that are concerned, there is some sort of let’s say time limit whereby you have to achieve certain financial milestones by year-end or by a specific date or is it purely the direction of for example asset disposals, but as long as you are progressing on that route, they are happy to see that continue. Is there a time limit on the metrics? Thank you.

Miguel Martínez

In relation with YPF, accounting talking, there would be any change whilst the financial, I mean right now we have our financial asset there. At a given moment YPF negotiation is greater than we have sent a letter to the Argentina authorities to start compensation, but no answer till the moment.

Once the Argentina government establish a price, that would be the moment in which our evaluation will have to be more refine from our financial investment into an account receivable. Even if we ask for more at that moment we’ll have to account the 51% for the proposal of the Argentina, so at that moment, the account will change either in one direction or the other I mean we should assume our right for (inaudible) gain but the moment would be in that which the Argentina authorities offers a compensation.

In relation with the timeframe to account for Gas Natural legally it would be 2014, but one idea, we are thinking of this to work on the pro forma to start giving you some flavor, but legally, it would be January 2014.

And in relation with the last one (inaudible) I mean the rating agencies basically what they want is clear direction from the company and delivery. And I think that right now both are in the good pace. There is no fixed state, I mean it is more direction and what we do is to keep permanent contact with them to let them know, how we are moving. And we are taking the decisions – we are taking it.

Maria Victoria Zingoni

Thank you, Miguel.

Miguel Martínez

You’re welcome.

Maria Victoria Zingoni

We have next question from (inaudible) please go ahead with your questions.

Unidentified Analyst

Hi, thanks for taking my question. I promise I will not ask you anything on LNG. I have two questions. On your downstream business what do you think can be a good approximation of your operating income at what you want to end of this year like as you may in 1995 a bit depressed oil price, so what can the operating income guidance you can have at the end of 2012?

And second, how your shares the 5% you have, would you consider anything strategic, do you think it is within the strategic bio or maybe because if you come to the markets now or maybe three more, four months your stock price is too depressed, I mean you can’t really get €1.3 billion. So do you want to place it with any strategy buyer and thirdly and most importantly, if your ratings are downgraded to non-investment grade with the no fault of your own like for example if Spain goes to BA3, BB- Repsol may have to come down to non-investment grade. Will you still stick to this plan or this balance sheet repair plan that you’ve outlined or will say that okay, our ratings have been downgraded so we do – this plan doesn’t do any hold, but do you think this plan will still hold at the sales or conversion et cetera, et cetera, in case if it’s downgraded beyond your control? Thanks.

Miguel Martínez

In relation with the downstream at current supply, I will say we will be around €1.1 billion, this is my estimate today. In relation with the preference shares as mentioned is the last bullet. So we still have a lot of room to work with other ideas, I’m sorry it’s basically structuring. It’s our last bullet, and we still have our things to work on before taking care of those. So we have in heart the specific no shift all they are already decided I mean it will be the last bullet and the last area to work in.

And final question, yeah the investment grade, I mean at least what we are as you know we can be do not just any company, we can be as far as do not just above their country based on how dependent it’s this financials, his bank is and his business from the country in which he is working. So I think that we follow the divestment plan we’re in, we have very good possibilities that even in the case of the low of – of a lost of the investment grade of keen of strength would be about it. We have to keep working and lead our best but I mean we will see it’s difficult to make that guesses, what I can tell you that we are putting everything on the table to guarantee the investment grades even in the worst scenario.

Unidentified Analyst

Okay, okay, Shabi.

Miguel Martínez

Thank you so much. Thank you.

Maria Victoria Zingoni

Thank you Shabi, we’ll now have from Santander, Jason Kenney, Jason, please go ahead.

Jason Kenney – Santander

Hi, firstly, just a small request, if I may, I was wondering it is possible to put the breakdown by turnover back into the quarterly result release, so it would be helpful for my money. And secondly, a question, can you give me the timing of a return to the Guyana well, sorry, if you did mention that early, but I did have an interruption in the call. So when you expect to start re-drilling back in Guyana and then going back to LNG, may be in a slight different angle, in the May 29 presentation, you showed concerns of similar thought detail for the LNG business at €2.7 billion at the end of 2011 and €2.4 billion at the end of May 2012. I’m just wondering your view on authorization on (inaudible) particularly low in sending my estimations?

Miguel Martínez

In relation with the break, Maria will give you a call and we will say sorry, if you don’t like then the break up. And the second one it’s going to spend much in the conversations with the Guyana government, which is that we’re involved right now. So still way too early to tell you anything, but we expect to have the possibility to do workings short-term in the second well. And in relation with the (inaudible), I mean those are your estimates 2.7, 2.4 we will see I mean we will see there at least in different companies which are in the process and normally I don’t like to advance the result of what third parties are going to put on the table.

Jason Kenney – Santander

Okay, many thanks.

Maria Victoria Zingoni

Thank you, Jason, we now have from BBVA, Luis de Toledo.

Luis de Toledo – BBVA

(inaudible) most of my questions have been answered and may be final one we got in tax rate, what are the reasons behind there a guidance increased to 44%, they are related to rest of transactions or you sell we can consider the goal going forward?

Miguel Martínez

24 is one we expect for the whole year in the existing conditions and the shift from last year is basically the (inaudible) division especially due to Libya. Okay, Luis.

Luis de Toledo – BBVA

Okay, perfect. Thanks.

Maria Victoria Zingoni

Thank you. We have the last question from Merrill Lynch with (inaudible) good afternoon.

Unidentified Analyst

Great, guys. Two questions, one going back to the credit rating and obviously, if we did see the software and getting downgraded beyond your control. And you are then downgraded to junk status. Would you considered playing with your domicile, is that something that management has talked about. And also coming back to YPF, with regards to the comments that we saw the President Venezuela make regarding how you deal with the Argentine Government will have direct implications on your assets in Venezuela, has that changed the way that you’re approaching the Argentine situation that’s all or you going to completely ignore those comments? Thank you.

Miguel Martínez

Well, in relation with your first one. We are not going to modify our headquarters. So we will keep it in Madrid, okay, and we will see what happen. But we already working and working heavily to have the most chances to keep the investment grade. And in relation with Venezuela, you have to remember that we heard, we are the first company to reach an agreement in (inaudible) mixed assets I think it was 2005, 2006. So we are always open to negotiation, but to negotiation and we need really a response from your side, so basically, I think it’s a good approach, and we will see because we have to defend our shareholders, and till the moment, the only way we have to work out is (inaudible), but we will be happy to reach any agreement, I mean Mr. Chariot will help us in that process for sure, if it will be worth. Okay?

Unidentified Analyst

Fantastic, thank you, Miguel.

Miguel Martínez

And thanks for being you the last one.

Unidentified Analyst

Don’t worry about that, you worried on when we have start this.

Miguel Martínez

Yeah.

Maria Victoria Zingoni

Thank you to all of you. We will be sending the clarification are we’re opening later this afternoon. Thanks again.

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