Soros Doubles YPF Stake in Argentina’s Nascent Shale Boom

Soros Fund Management LL Founder George Soros
George Soros, billionaire and founder of Soros Fund Management LLC, is the world’s 23rd wealthiest person with a net worth of $26.3 billion, according to data compiled by Bloomberg. Photographer: Simon Dawson/Bloomberg

George Soros’s $28 billion family office more than doubled its stake in YPF SA, making the state-controlled oil producer its biggest U.S.-traded stock holding two years after Argentina seized control of the company.

Soros Fund Management LLC added 8.47 million shares of YPF in the second quarter, according to a filing yesterday, bringing its position to 3.5 percent of the American depositary receipts. That was worth $450 million at the end of June, making Soros the fourth-biggest holder. The stock rallied today.

YPF, control of which was seized by Argentine President Cristina Fernandez de Kirchner in 2012, is steering its efforts into some of the world’s largest shale deposits in the Vaca Muerta formation along with Chevron Corp. to reverse a widening energy deficit. The Buenos Aires-based company said yesterday that it made a shale discovery in Mendoza province, its third non-conventional find in the country.

Argentina defaulted for a second time since 2001 on July 30 after a U.S. court blocked its $539 million interest payment for not complying with a ruling to also pay a group of defaulted bondholders. Those so-called holdout creditors, led by hedge-fund Elliott Management Corp., refused to accept new bonds worth about 30 cents on the dollar in restructurings in 2005 and 2010 and instead sued for better terms. Until Argentina pays them about $1.5 billion or reaches a settlement, the nation can’t pay interest on any of its overseas debt.

Soros, 84, is the world’s 23rd wealthiest person with a net worth of $26.3 billion, according to data compiled by Bloomberg. The Hungarian-born investor increased his fortune 14 percent this year.

Perry, Third Point

Perry Capital, the $10.9 billion hedge-fund firm run by Richard Perry, and Dan Loeb’s Third Point LLC also added significantly to their YPF holdings in the second quarter. Lazard Ltd., the second-biggest holder of the ADRs, sold 2.3 million shares to reduce its stake to 4.38 percent, data compiled by Bloomberg show.

Michael Vachon, a spokesman for Soros’s New York-based fund, didn’t immediately reply to an e-mail seeking comment on the increased stake in YPF. The YPF press office didn’t immediately reply for comment on the Soros investment.

Argentina’s Fernandez seized a 51 percent stake in YPF from Repsol SA in April 2012, handing control of the company to former Schlumberger Ltd. executive Miguel Galuccio. The company’s ADRs have more than doubled since the takeover to $31.64. Down 6 percent this year, they rose 4.9 percent in the second quarter and gained 4.8 percent to $32.46 at 1:57 p.m. in New York today.

Repsol Compensation

YPF returned to the international debt markets last year and sold $1 billion of bonds due 2024 in May to finance its exploration and production program.

The Argentine government agreed to compensate Repsol with $5 billion of bonds earlier this year, and the Spanish energy producer sold the majority of its remaining shares in the company afterward.

YPF said yesterday it discovered oil at a well in the Agrio formation in southwestern Patagonia, the third shale find in the country in four years. Agrio is in the Neuquen basin, the site of Vaca Muerta, the world’s second-biggest shale gas deposit and fourth-biggest shale oil deposit.

Energy Investments

Speaking from the presidential house last night, President Fernandez said Argentina is seeking to rewrite oil legislation as the country needs clear rules to attract investment. Plans to establish national taxes are being opposed by some provinces. Currently, royalties vary form province to province.

“We want to have an equal regulatory framework with the same legal contract in Jujuy as in Tierra del Fuego,” Fernandez said, referring to the northern and southern provinces. “We need a lot of transparency because that will allow us to attract investors to Vaca Muerta and other fields.”

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