SPANISH EQUITY RESEARCH OIL & OIL SERVICES 23 August 2011

REPSOL YPF
Conflict in Libya close to an end?
Conflict in Libya could be close to an end. After six months of civil war,
opposition fighters are now taking control of the capital Tripoli, and are about to win the battle for the control of the country against former Libyan leader Gadafi. This suggests that the war in Libya could be close to an end.

STRONG BUY
Target Price Share Price Upside REP.MC / REP SM
Market Cap Enterprise Value Free Float N Shares Average Daily Volume 22,372 m 38,536 m 13,871 m 1,221 m 327 m 3m
-18.2 0.8

30.50 18.33 +66%

Production could be restored in 3-4 weeks. In the last results presentation

back in July, Repsols management stated that so far, the companys facilities in Libya did not suffer any damage. Accordingly, once the stability of the country is recovered and its security improved, Repsol is ready to restart the activities in Libia in around 3-4 weeks, probably before the year end.

Our estimates do not reflect any further output from Libya in 2011. If
operations in Libia are finally resumed, it would imply an upside risk to our estimates since we were not expecting any further output from Libia during this year (apart from the 2.4m boes produced in Q1). As for 2012, we include in our estimates 27K boes/d, 33% below the 40K boes/d produced in 2010.

Performance
Absolute % Relative %
30.0

1m
-17.8 -2.2

12m
2.5 24.3

What is the weight of Libya in Repsol? By the end of 2010, Repsol held
proved reserves of around 120m boes in the country and it had a total output from Libya of 40K boes/d during the year (14.6m boes). This represents 5-6% of the total proved reserves of the group and 5% of the total output (11% and 12% respectively ex-Argentina).
25.0 20.0

15.0

Positive news, we reiterate our Strong Buy rating. In our view, the end of
the conflict in Libya is obviously very good news for Repsol; however, we maintain our assumption of no production from the country in 2011 waiting for improved visibility about developments in the country. Nevertheless, we keep our positive view on the stock, even in the contex of turmoil in Libya, on the back of Repsols improving operating momentum, strong cash generation, low leverage and attractive valuation: 66% upside to our EUR30.5 target price and 20% discount to peers (widened from 10% a month ago), which we do not find justified, moreover if the conflict in Libya finally comes to an end.

10.0

5.0

0.0 08/08 12/08 04/09 08/09 12/09 04/10 08/10 12/10 04/11 08/11

Repsol YPF

Ibex 35

Financial Ratios
EBITDA (EURm) Net profit (EURm) EPS (EUR) Adj. EPS (EUR) P/E (x) P/E Adj. (x) EV/EBITDA (x) Debt/EBITDA (x) P/BV (x) ROE (%) DPS (EUR) Dividend yield (%)

FY08
8,121 2,555 2.09 2.03 10.1 10.4 4.6 1.1 1.3 13.3 1.05 5.0

FY09
6,749 1,559 1.28 1.17 12.6 13.7 6.1 2.4 1.0 7.8 0.85 5.3

FY10
9,196 4,693 3.84 1.87 4.7 9.8 4.4 1.4 0.9 21.3 1.05 5.8

FY11E
9,286 2,498 2.05 1.98 9.0 9.3 4.1 1.1 0.9 10.1 1.16 6.3

FY12E
10,171 2,769 2.27 2.27 8.1 8.1 3.7 0.8 0.8 10.6 1.27 6.9

FY13E
10,904 3,109 2.55 2.55 7.2 7.2 3.2 0.5 0.8 11.3 1.40 7.6

Analyst Fernando Lafuente

+34 91 550 87 16 flafuente@nmas1equities.com

(*) Historical multiples based on average share price of the year

Disclaimers

Explanation of Ratings: N+1 Equities Research Department provides four core ratings: Strong Buy, Buy, Neutral and Sell, based on the expected performance over the next 6 months. Strong Buy represents an expected total return of 25% or greater (or expectations of significant market outperformance), and is used for the most attractive stocks in our coverage. Buy represents an expected total return between +15% and +25% (or expectations of market outperformance). Neutral represents an expected total return in a range between 0% and 15% (or expectations of performance in line with the market). Sell represents an expected total return at or below 0% (or expectations of underperformance versus the market). Lastly, a Suspended rating indicates that N+1 Equities is precluded from providing an investment rating or price target for compliance reasons.

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