Feb. 26 (Bloomberg) -- Repsol YPF SA, Spain’s largest oil company, said fourth-quarter profit fell 11 percent as crude prices slumped and production dropped.

Adjusted net income, which excludes inventory valuations, dropped to 549 million euros ($698 million) from 616 million euros a year earlier, the Madrid-based company said today in a regulatory filing. That beat the 461 million-euro median estimate of nine analysts surveyed by Bloomberg News.

Crude futures traded in New York tumbled by a record 56 percent in the quarter, hurting earnings at Europe’s biggest oil companies. Repsol agreed to cut its share of output from a venture in Libya in July after prices peaked at $147.27 a barrel. Oil has since plunged more than $100. Operating income at Repsol’s YPF Argentine unit fell 5.6 percent in 2008.

“While the results are better than expected, the deterioration in Argentina is worrying,” Rafael Rico, energy analyst at Madrid-based Fortis Bank SA, said by telephone. Rico has a ‘buy rating’ on the stock.

Repsol added 4.5 percent to 12.73 euros in Madrid. The shares fell 38 percent last year.

Repsol is the last of Europe’s biggest oil companies to report earnings. It had a net loss in the quarter of 105 million euros. Royal Dutch Shell Plc, Europe’s largest oil company, recorded its first quarterly loss in a decade of $2.8 billion. BP Plc had its first loss in seven years of $3.3 billion. France’s Total SA had a quarterly loss of 794 million euros while Eni SpA of Italy lost 874 million euros.

Cost Savings

Chief Executive Officer Antonio Brufau said the company plans to target 1.5 billion euros in cost savings. “We are revisiting minor projects,” he said.

Given the backdrop of the deteriorating economic outlook and the credit crisis, he told a press conference that “it would be some target to repeat 2008 results.”

Excluding YPF, Repsol’s production fell 7.1 percent in the quarter. The company has lost reserves in South America following moves by Venezuela, Bolivia and Ecuador to take resources into state ownership or renegotiate contracts.

Fourth-quarter production fell to 330,000 barrels of oil equivalent a day from 355,000 barrels in the year-earlier period. Excluding contractual and regulatory changes in Bolivia, Libya and Ecuador, output was 3 percent higher than the same quarter of 2007.

Ecuador’s Oil and Mines Minister Derlis Palacios said today the government reached an accord with Repsol for the payment of taxes over the next five years. Repsol has completed an agreement with Ecuador, Brufau said, without elaborating.

Repsol still plans to sell 25 percent of its Argentine unit, though Brufau said no date had yet been fixed.

Repsol reported three discoveries in Algeria in January where the company is the operator. There were also two further finds offshore Brazil. Earlier this month, the company announced the deepwater oil discovery at the Buckskin prospect in the Gulf of Mexico in which Repsol is the operator in the exploration phase.

The exploration and production division “will be negatively affected by the falls in crude oil prices and the contract changes implemented in Libya,” Sonia Ruiz De Garibay, an analyst at Caja Madrid Bolsa, said before the earnings were released. Ruiz has a “buy” rating on the stock.

Refining margins, or the profit from turning a barrel of oil into fuels, in Spain widened 43 percent to $8.60 a barrel.

The company proposed a final gross dividend for 2008 of 0.525 euros a share.

This year’s dividend will depend on the company’s “financial discipline,” Brufau said.

To contact the reporter on this story: Gianluca Baratti in Madrid at gbaratti@bloomberg.net

Last Updated: February 26, 2009 12:07 EST