Repsol May Consider Shale Asset Swap as YPF Compensation

Repsol SA said it may consider shale assets as part of compensation for the expropriation of its stake in YPF SA after an agreement on the amount to be paid is reached with Argentina.

“It is something we might consider once the amount of compensation is fixed,” said Miguel Klingenberg, Repsol’s deputy legal counsel, in a phone interview from Washington.

Spain’s Repsol is suing oil companies involved in shale projects with YPF, its former unit that was nationalized by Argentina in April. The expropriation of YPF occurred three months after Argentina’s biggest oil company announced discoveries in Vaca Muerta, which is estimated to hold at least 23 billion barrels of oil equivalent. YPF has signed preliminary accords with Chevron Corp., the second-largest U.S. oil producer, and Bridas Corp., and is seeking more partners to help it develop shale in southern Argentina.

A shale swap would benefit Repsol “because currently Repsol’s shares do not account for YPF’s compensation,” said Alejandro Demichelis, a London-based analyst at Exane BNP Paribas. “The only issue is how can Repsol justify a large investment in Argentina once again? The company would have to give a very good explanation on how the project would be financed.”

Willingness to Negotiate?

Argentina and Repsol haven’t yet had compensation talks, Klingenberg said. Repsol, based in Madrid, hasn’t determined how much compensation it wants for its 51 percent stake in Buenos Aires-based YPF, he said, adding Argentina has never shown any willingness to negotiate.

Alejandro Di Lazzaro, a YPF spokesman in Buenos Aires, declined to comment in an e-mail. Axel Kicillof’s spokeswoman Jessica Rey declined to comment in a telephone interview from Buenos Aires if Argentina and Repsol have had negotiations. Kicillof, Argentina’s deputy economy minister, oversees the country’s energy policies.

“Any agreement between Repsol and the Argentine government will be taken extremely well by the market for many reasons,” Jim Harper, director of corporate research at BCP Securities LLC, said in a telephone interview from London. “It would eliminate legal risks not only for YPF but also for Chevron, Bridas and all the other companies Repsol is suing.”

On April 17, the day after YPF’s nationalization, Repsol Chairman Antonio Brufau said the company sought $10.5 billion in compensation.

Brufau gave the figure based on the valuation methodology contained in YPF’s bylaws, which were written by the government that privatized the company in the 1990s, said Kristian Rix, a Repsol spokesman, in a phone interview from Madrid today.

“That figure isn’t necessarily the one to be sought now,” he said.

‘Confiscation’ Solution

Repsol remains open to discussing a solution for the “confiscation,” while it will continue trying to determine an amount that will include values of stock and damages, Klingenberg said. Repsol will continue its legal actions until negotiations begin, Klingenberg said.

“Sooner or later, the pressure of the international community and the deterioration of internal economics will oblige them to change,” he said.

YPF American depositary receipts fell 1.4 percent to $15.35 at 1 p.m. in New York, after earlier sliding as much as 2.8 percent to $15.12. The stock has dropped 45 percent in the past year. Repsol fell 1.2 percent to $17.16 at the close in Madrid.

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