YPF SA, Argentina’s biggest energy company, fell the most among global peers on declines in output and profit and amid speculation the state-owned producer will struggle to fund development of shale oil and gas deposits.
YPF lost 5.4 percent to 118 pesos at 2:37 a.m. in Buenos Aires, the biggest decline among 15 peers tracked by Bloomberg. The stock headed for the biggest three-day slide in a year.
First-quarter net income declined 3 percent to 1.25 billion pesos ($249 million) on higher costs and increased fuel imports, the Buenos Aires-based company said in a statement after the close of trading yesterday. In dollar terms, profit fell 19 percent from a year ago. Investors are also concerned a government plan to attract dollars into the company is a sign it lacks the money to develop the Vaca Muerta shale formation, said Adrian Mayoral, owner of brokerage Mayoral Bursatil.
“The fear is YPF ends up like Aerolineas Argentinas, a chronically unprofitable nationalized company not returning anything to investors,” he said by telephone from Buenos Aires.
A year after seizing YPF, President Cristina Fernandez de Kirchner wants to funnel more money into the nation’s energy industry as the government struggles to boost production from Latin America’s biggest shale reserves. With Argentina already committed to pumping $2 billion of central bank reserves into a fund for energy investments, the government is asking holders of as much as $160 billion in undeclared funds to bring back dollars without penalties if they invest in an energy bond to mature in 2016 paying a 4 percent coupon.
Economy Ministry Hernan Lorenzino said yesterday that proceeds from the bond will be mainly invested in YPF, whose crude output fell 0.7 percent in the quarter to 226,300 barrels a day from a year earlier, while costs rose 34 percent on higher fuel imports. Natural gas output fell by 3.7 percent.
“The company will need to invest a significant amount of capital expenditures to increase production,” Banco Itau BBA SA analysts led by Ricardo Cavanagh wrote in a note today, advising investors to avoid Argentine equities until bond spreads narrow. “The widening gap between the official and unofficial foreign exchange rate, which now surpasses 100 percent, brings into question our assumption of domestic fuel-price convergence with international values.”
Fernandez’s government seized 51 percent of YPF from Repsol SA in April 2012 to stem fuel imports that doubled to $9.4 billion in 2011 and are expected to rise to as much as $15 billion this year. YPF is trying to secure binding agreements with companies including Chevron Corp. and Bridas Corp. for a $37 billion expansion plan to develop the Vaca Muerta, a Connecticut-sized area in southern Argentina that may contain at least 23 billion barrels of oil equivalent.
Negotiations with potential Vaca Muerta partners are progressing, said Chief Financial Officer Daniel Gonzalez in a conference call with investors today. He declined to elaborate on timing for final deals.
Gonzalez said the company has a comfortable cash position of $1 billion and said it will end 2013 with a cash position between $500 million and $1 billion.