Argentina 'rings changes at YPF'

Fighting talk: Repsol chairman Antonio Brufau

The Argentinian government has reportedly unveiled plans for operational changes at YPF to boost output and make savings after saying this week it would expropriate Repsol’s 51% stake and nationalise the company.

In the first joint statement issued since taking over the day-to-day running of YPF, Planning Minister Julio de Vido and Deputy Economy Minister Axel Kicillof said they were taking steps to “guarantee the normal functioning of the company and, at the same time, laying the foundations to achieve full oil and gas production and to recover energy self-sufficiency”, the Financial Times reported.

Plans to be implemented include boosting production by 2 million barrels – or 2.5% of current annual output – through drilling and maintaining more wells over the next eight months, the government administrators said.

Another 14 drilling rigs would be mobilised, in addition to the eight currently carrying out workover activities, to maintain wells.

That would result in 130 wells being drilled and more than 400 repairs carried out by December to facilitate the production boost.

The government will also redirect production from YPF’s El Porton field in the western province of Neuquen “which will allow us to inject an extra 2.2 million cubic metres into the national system daily and save about $50 million a month”, the statement read.

It follows the controversial move by President Cristina Fernandez to seize the Repsol stake in YPF after accusing the Spanish oil company of stripping profits from Argentina’s biggest oil and gas producer and running it into the ground.

She has also blamed Repsol for Argentinian fuel imports of $9.4 billion last year.

A draft bill on the expropriation, also covering Repsol-controlled subsidiary YPF Gas, has been signed by Congress with a vote by the Senate expected next week.

However, Fernandez was reported to have installed the two government officials at the helm of YPF by decree even before the bill reached Congress.

The expropriation bid has been condemned by countries including the US, Mexico and the UK after Spain threatened Buenos Aires with economic and diplomatic “consequences” in retaliation for the move, though there appears little Madrid can do to halt it.

Repsol chairman Antonio Brufau has vowed to fight the YPF nationalisation “with everything we have”, while asserting overall operations were strong even without the contested Argentina unit.

A court battle also looms over how much Argentina will pay Repsol for the stake, after Kicillof this week ruled out the $10.5 billion that the Spaniards are reported to be demanding.

Furthermore, the Eskenazi family, which owns a 25.46% stake in YPF after making a strategic investment at the behest of the Argentinian government in 2008, could face financial woes and a possible default on its loans, according to the FT.

The investor is reported to owe $560 million to banks including Credit Suisse, Goldman Sachs and Paribas – that helped to finance its investment and has still not paid off the $1 billion it borrowed from Repsol for the deal.

The Eskenazis were said to be dependent on YPF dividends to make the debt payments, but the  government will now plough these funds straight back into operations.

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