Repsol

Sensitivity analysis

The company monitors its exposure to market risks in terms of risk sensitivity. This is complemented by other risk metrics whenever the nature of the risk positions so requires.

For each of the market risks described below we include an analysis of sensitivity towards the main risks inherent in financial instruments, showing how income and the assets could be affected (in the paragraphs that make up the "changes due to changes in value") in accordance with requirements of the IFRS 7 Financial Instruments: information to be disclosed. 

The sensitivity analysis uses the variations in risk factors representative of their past behaviour. The estimates are representative of both favourable and unfavourable variations. The impact on income and/or assets is estimated according to the financial instruments held by the Group at the end of each financial year.

a) Exchange-rate risk: 

The Group's income and assets are exposed to exchange rate variations of the currencies in which we operate. The currency that generates the greatest exposure is the US dollar.

Repsol YPF obtains financing predominately in dollars, whether directly or by means of exchange rate derivatives (see note 21).

The sensitivity of net income and assets as a result of the effect on financial instruments held by the Group at 31 December to the appreciation or depreciation of the exchange rate are detailed below:

Effect of exchange rate variation of the euro against the dollar:

Furthermore, a 5% appreciation of the dollar against the Brazilian real and the Argentinean peso, for instruments held at 31 December 2010, would have resulted in 2010 in an approximate variation of net income after tax of -€4 million and €53 million, respectively, while in 2009 this would have resulted in an increase of €2 million and €35 million, respectively. 

Alternatively, a 5% appreciation of the euro against the Brazilian dollar and the Argentinean peso would have resulted in 2010 in a decrease in assets of €0.9 million and €1.5 million, respectively, while in 2009 this would have resulted in an increase of €18 million and €1 million, respectively. 

b) Interest rate risk: 

Variations in interest rates can affect income or expenditure from interest on financial assets and liabilities pegged to a variable interest rate; they may also modify the fair value of financial assets and liabilities with a fixed interest rate. 

Repsol YPF contracts interest rate derivatives in order to reduce the risk of variations in financial expenses or in the market value of its debt. These derivatives are generally designated on the books as hedging instruments (see note 21).

At 31 December 2010 and 2009, net financial debt including preference shares (see Capital management section at the end of this note) at fixed interest stood at €9,917 and €7,745 billion, respectively. These figures respectively account for 90% and 53% of the total net financial debt including preference shares. 

The sensitivity of net income and assets as a result of the effect on financial instruments held by the Group at 31 December to interest rate variations are detailed below:

c) Commodity price risk: 

As a result of the performance of commercial operations and activities, the Group’s income is exposed to the volatility of prices of oil, natural gas and products derived from these. 

Repsol YPF contracts derivatives on these risks with the aim of reducing exposure to price risks. These derivatives provide a financial hedge for income, although they are not always designated as hedges when booked (see note 21). 

At 31 December 2010 and 2009, a 10% increase or decrease in crude oil and oil product prices would have resulted in the following variations in net income as a consequence of its effect on financial instruments held by the Group on that date: 

Last updated: 26 March 2011