Spanish oil and gas giant, Repsol (REPYY) , blindsided investors on Thursday morning with a set of first-quarter results that surpassed expectations.

Against a backdrop of recessionary conditions in the oil and gas sector, estimates had suggested that adjusted net income would fall to just €245 million ($280 million) in the first-quarter of 2016 from €928 million in the same time period in 2015. However, the actual result reported in the update was €576 million.  

The result didn't just beat the consensus, it topped the highest of all analyst estimates included in consensus data set, given that even the most bullish of forecasters projected just €445 million for the period. 

The shares responded by rallying sharply in early European trading, rising by almost 6%, bringing them within touching distance of their earlier 2016 high. The shares have also been boosted by rising oil prices today. 

Accounting for the result, management stated in the release that the strong performance came on the back of measures taken to improve efficiency and cost savings within the individual business units.

The company described the first quarter outcome as being "significant in the context of a deep fall in crude oil and gas prices" before highlighting a 37% reduction in Brent and a 30% fall in the Henry Hub marker price during the relevant period.

TheStreet Recommends

Looking into the details, last year's adjusted net income of €928 million included a notable one off gain of €500 million, which arose from the appreciation of foreign currency holdings following Argentina's settlement with Repsol over the renationalization of energy company YPF. However, even after adjusting for this, this year's first-quarter result for Repsol was still significantly ahead of that reported in 2015.

At the divisional level, the all important upstream division reported a profit of €17 million, a marked improvement when compared with the €190 million loss of Q1 2015, representing a noteworthy beat of the consensus estimate for a loss of €195 million.

The group's larger downstream division accounted for the majority of adjusted net income in the first quarter of 2016, with the operating result of €556 million representing a 4% increase upon last year and a significant beat against the consensus of €474 million.

On the downside, the natural gas result deteriorated in 2016 with net income falling by 18.9% to €99 million, missing the consensus of €106 million. However, a moderate beat against the consensus for income from "corporate and others" partially offset this.

Despite the strong beat and a positive reaction from the market at large, analysts at Jefferies were unimpressed, choosing to reiterate their underperform rating and price target for the shares.

The analyst team at Jefferies assigned a price target of €9.00 to Repsol stock in late April 2016, which implies downside of 21% from the current level of €11.40.