Repsol's majority stake in YPF was taken over by the Argentine government in April, forcing the company to re-think its strategy to compensate for the loss of a big cash contributor and ensure future funding for its exploration projects.

The company has said it will sell assets -- including its liquefied natural gas assets in Canada, Peru and Trinidad and Tobago -- in a move to invest 19 billion euros ($23.03 billion)over the next four years to boost production.

Repsol's upstream division, including exploration and production, drove a 27 percent rise in second-quarter net profit, compensating for a weaker year-on-year performance from its downstream business as Spain's economic recession deepened.

Net profit adjusted for one-time items and inventory costs (CCS adjusted net) reached 481 million euros between April and June up 27 percent from a year ago, Repsol said on Thursday, beating the top-end forecast for 449 million in a Reuters poll.

Profit was also boosted by the start-up of the first phase of the Margarita gas field in Bolivia, which drove a 12.1 percent rise in gas realization prices.

Repsol, whose shares have dropped 52 percent this year due to the turmoil in Argentina, said its clean net profit fell 44.6 percent to 274 million euros in the second quarter, reflecting a lower inventory value due to falling oil prices.

Results also included a 38 million euro charge against the loss of its stake in YPF, it said.

At 0705 GMT, Repsol's shares were up 0.4 percent at 11.0 euros, compared with an 0.3 percent decline in Spain's blue chip index .IBEX. ($1 = 0.8248 euros)

($1 = 0.8248 euros)

(Reporting By Tracy Rucinski; Editing by Julien Toyer and Jane Merriman)

• A Permanent Economic Emergency