Argentina has the cash reserves to make a tender offer for Repsol (REP) YPF SA (YPFD)’s local unit, the country’s largest energy company, and will likely put further pressure on the industry to boost output, Barclays Capital said.
“We are not in the camp of those that think that Argentina cannot afford to make an offer to Repsol and the rest of the shareholders,” New York-based analyst Sebastian Vargas said today in a note to investors. Using central bank reserves to make an offer for YPF SA “should also be considered,” he said.
Argentine President Cristina Fernandez de Kirchner is increasing pressure on oil companies to invest more after fuel imports doubled to $9.4 billion in 2011. In October, the government ordered oil and mining companies to repatriate export revenues and in November opposed a dividend payment for Buenos Aires-based YPF (YPF), as it seeks to stem capital flight. YPF was also one of nine companies that lost financial incentives for oil exploration and production, the government said Feb. 3.
“We think the administration will increase intervention in the energy sector to guarantee an increase in production and investment,” he said. “The conflict with Repsol YPF is just the tip of the iceberg of a much more complex energy problem.”
YPF rose 11 percent to close at $35.90 in New York, giving the company a market value of $14.1 billion. The stock surged after YPF said in a separate statement that it was boosting its shale oil contingent resources to about 23 billion barrels.
The company’s American depositary receipts have slumped 29 percent in the past 12 months on concerns the government will nationalize YPF. The government may pay book value of $11.7 billion for the asset and that might be enough to convince Repsol to accept an offer, Vargas said.
‘Sizeable Political Gains’
Argentina’s government has discussed nationalizing YPF, Pagina/12 newspaper reported Jan. 29, without saying where it got the information. Pagina/12 regularly runs interviews with top government officials such as Vice President Amado Boudou, who did not rule out the possibility of nationalizing YPF, Vargas said, citing recent media minister interviews.
Nationalization would have “sizeable political gains” for Fernandez and would gain Congressional approval, Vargas said. The nationalization of YPF would have a “very negative effect” on credit markets, he said.
Antonio Brufau, chief executive officer of Repsol, met Argentina’s planning and economy ministers on Feb. 6 to discuss government criticism of YPF, Spanish news agency Efe reported, citing people close to the meeting it didn’t identify.
The company invested a record 13.3 billion pesos ($3.1 billion) last year and added 137 million barrels of oil equivalent to its reserves. That gave YPF a so-called reserve replacement ratio of 160 percent, it said today in a regulatory filing.
Argentine oil production dropped by 12 percent between 2003 and 2010 even as consumption gained 38 percent, according to Vargas. Gas output dropped 2.3 percent in the period and reserves fell to the lowest since 1980 as demand rose 25 percent amid an expanding Argentine economy, Vargas said.
Argentina will have to increasingly rely on oil imports to boost its economy, he said.
The Petersen Group, owned by the Eskenazi family, bought into YPF in 2008 and became the operator of the company. Under the terms of the acquisition agreement with Repsol, YPF pays 90 percent of its annual net income as dividends.
The dividend per share is the fourth largest in the world among oil companies worth $10 billion or more, according to data compiled by Bloomberg.
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