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4-Traders Homepage  >  Equities  >  Bolsa de Madrid  >  Repsol SA    REP   ES0173516115

REPSOL SA (REP)

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Argentina's Battle For YPF Takes On International Dimensions

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04/10/2012 | 12:16am CET

--More countries involved in YPF dispute as provinces revoke concessions from Brazilian and Canadian firms

--Analysts say conflict is spooking investors

--Dispute seen delaying solution to energy problems

 
   By Taos Turner 
   Of  
 

Argentina's dispute with its largest oil and gas producer, YPF SA (YPF, YPFD.BA), has taken on international dimensions after provincial governments revoked oil concessions held by companies from three countries.

The dispute with YPF, which had previously been limited to a tensions with Spain, home to YPF's majority shareholder, Repsol YPF SA (>> Repsol YPF SA), now involves Brazil, Canada and Chile.

President Cristina Kirchner has aggressively confronted the oil and gas industry this year as declining output at aging fields leads her government to import growing volumes of expensive fuel to meet domestic demand.

Kirchner and provincial governors say private-sector companies haven't invested enough in exploration and production, turning Argentina into a net energy importer.

But until last week the government and the provinces had focused their attacks on YPF. In recent weeks provincial governments have revoked more than a dozen YPF's concessions, saying the company invested too little in its oil fields.

That changed when Neuquen Province broadened the scope of its targets to include other foreign investors, jeopardizing badly needed investment in the sector, analysts say.

Neuquen rescinded concessions held by three companies, including Petrobras Argentina SA (PZE, PESA.BA), a unit of Brazil's state energy giant Petroleo Brasileiro SA (PBR, PETR3.BR), and a subsidiary of Canada's Azabache Energy Inc (AZBCF, AZA.V).

Local media reported Neuquen revoked the Brazilian and Canadian concessions as part of legal strategy to defend itself against claims it singled out YPF even though other companies have invested even less, or nothing at all, at other concessions in the province.

Indeed, YPF has accused the provinces of "discriminating" against it while letting other firms off the hook and said such discrimination is unconstitutional.

A spokesman for Neuquen Governor Jorge Sapag could not be reached for comment.

In March, Chubut Province rescinded a concession jointly held by YPF and Chile's state-owned oil and gas company Empresa Nacional del Petroleo SA, also known as ENAP.

"It's one thing to take a block back because contractual agreements have not been complied with. It's another thing to take a block back because the government is unhappy with something. That's not right. If done systematically and fairly, that's part of natural business practices. But if done the latter way, it's not," said Warren Levy, founder and chairman of the oil services company Estrella.

Levy said Argentina's natural resources are "phenomenally attractive" but constantly shifting government policies make the country less appealing to oil and gas companies.

Kirchner is taking a hard line with oil companies at a time when the country needs billions of dollars of investment to develop what are thought to be some of the world's largest deposits of unconventional oil and gas locked in shale rock.

The Kirchner administration has compensated for booming demand and falling gas production by importing expensive gas from Bolivia and Trinidad & Tobago. Last year, Argentina's energy import bill doubled to $9.4 billion. That is crimping Argentina's trade surplus, which is a key source of the U.S. dollars the administration uses to pay its creditors.

YPF has denied government accusations of underinvestment and is fighting the concession grabs in court. Meanwhile, Repsol YPF has enlisted the aid of high-ranking Spanish government officials, including the King of Spain.

But it is unclear if those efforts have achieved anything. Local newspapers have reported a call by King Juan Carlos angered Kirchner.

So far the other companies that lost concessions have adopted a more conciliatory response.

Enap and Azabache Energy declined to comment.

While defending its investment track record at the concession revoked by Neuquen, Petrobras Argentina said in a statement it was open to dialogue with provincial officials. Petrobras officials declined to comment.

Apart from the diplomatic issues raised by the provinces' actions, the rapidly evolving dispute with YPF, and now other companies, seems likely to worsen matters.

"It is a difficult time for doing business in Argentina," economist Federico Thomsen said in a report Thursday. "If an orthodox programme ever existed, it has been shelved, replaced by messy and often incoherent, market-unfriendly policies."

-By Taos Turner, Dow Jones Newswires; 5411-4103-6728; taos.turner@dowjones.com

--Jeff Fick and Graciela Ibanez contributed to this article.

Stocks mentioned in the article : Repsol YPF SA
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Financials (€)
Sales 2016 37 873 M
EBIT 2016 2 122 M
Net income 2016 1 419 M
Debt 2016 10 511 M
Yield 2016 5,26%
P/E ratio 2016 12,59
P/E ratio 2017 11,31
EV / Sales 2016 0,79x
EV / Sales 2017 0,63x
Capitalization 19 222 M
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Average target price 13,1 €
Spread / Average Target -0,25%
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