YPF dodges takeover bullet, for now

Renewed criticism: Cristina Fernandez de Kirchner again urges oil companies to invest further in her opening Congressional address

YPF stocks rebounded at least 14% Thursday afternoon after Argentina’s president stopped short of announcing a partial or complete government takeover of the Repsol-controlled oil company in her opening address to Congress.

Cristina Fernandez de Kirchner, who has put intense pressure on oil companies to ramp up investments in the country, echoed her prior refrains urging further foreign investment and decried the company’s declining domestic production.

"We will take all measures necessary to provide fuel to all Argentines," she said.

A Repsol spokesman did not immediately respond to a request for comment by Upstream on her remarks.

Business newspaper Ambito Financiero on Wednedsay had anticipated an announcement was "imminent" towards greater control of the company, which it had described as "in crisis". Repsol chairman Antonio Brufau was in Buenos Aires Wednesday for a series of meetings with government officials.

Investors have been keen to tease out whether government discussion of a takeover -- first put forth several weeks ago by the Pagina 12 newspaper -- was merely sabre-rattling or more serious.

The talk has come on top of other forms of pressure on oil companies, particuarly YPF, including suspension of tax breaks and new restrictions on export revenue.

The stakes are particularly high for YPF, which recently announced an eye-popping 23 billion barrels of potentially recoverable oil and gas in the Vaca Muerta shale play, reserves it believes will take $25 billion to develop over the next decade.

Additional signs of the tension easing appeared Thursday morning, with Bloomberg reporting that Spain and Argentina put together a working group to ‘resolve their differences’ over YPF.

“Whatever difference there is we can deal with it through meetings,” Spanish industry minister Jose Manuel Soria told reporters in Madrid, according to the news wire.

In a note, Tudor Pickering Holt said the move – which it still considers unlikely and a “broken record” political point -- would not necessarily be disastrous for shareholders.

“We believe that even with nationalisation shareholders will likely get more than (the) current price,” the company wrote, adding that it "would be economic suicide for Argentina to simply seize the assets but unfortunately its politicians seem to lack any economic sense.”

Still, reporter Carlos Burgueno wrote in the Buenos Aires Herald newspaper that YPF could be in the government’s reach. With a market capitalisation of under $10 billion, the government has the means to muster $5 billion to capture a majority stake.

“What remains is for the government to formally send a draft bill to Congress that is already on the desk of President Cristina Fernández de Kirchner and that would allow the Executive to purchase shares of private companies to gain the majority stake, something that is now legally barred,” Burgueno wrote.

At present, Repsol has a 58.23% stake in the company, the Eskenazi family has a 25.4% stake and the remainder, 16.3% are listed on trading exchanges and under private ownership, so the government would need to negotiate with Repsol over the shares, Burgueno said.

“The problem, therefore, remains how to obtain the millions of dollars required to start investing in the oilfields that would be taken from the company,” Burgueno wrote. “In this regard, some Kirchnerite politicians propose to dust down the long-standing friendship with Venezuela’s Hugo Chávez and form an association with PDVSA, allowing the latter to enter the local market. Plan B is Petrobras.”

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