UPDATE 2-Repsol Q1 profit boosted by inventory gains

(Adds further details, updates shares)

By Joe Ortiz

MADRID, May 13 (Reuters) - Spanish oil and gas company Repsol YPF (REP.MC: Quote, Profile, Research) beat expectations with a 16.5 percent rise in first quarter adjusted net income on Tuesday though analysts said the result was flattered by inventory gains.

The 976 million euro ($1.51 billion) profit, adjusted to remove non-recurring items, beat an average forecast of 705 million euros in a Reuters poll of 13 analysts.

Analysts said the profit was helped by 274 million euros in inventory gains but the company was unable to immediately confirm this.

"You have to strip out from the inventory gains of 274 million (euros) as well as the gain from the sale of YPF from the EBIT," said one sector analyst who declined to be named. Repsol recorded a pretax capital gain of 86 million euros from a payment from the Petersen group, which bought a 14.9 percent stake in its Argentine unit YPF earlier this year for 2.24 billion euros.

Repsol's adjusted operating profit (EBIT) rose 16.7 percent to 1.65 billion euros, ahead of a forecast of 1.29 billion euros in the poll.

Analysts at Citi said the earnings were also flattered by forex hedging gains and a low tax rate.