Repsol divests final YPF stake

Friday, May 16, 2014

Last week, Spain's Repsol sold its remaining 12% stake in Argentine oil giant YPF SA for US$1.25 billion, and YPF's stock price jumped 10%.

The Spanish oil company controlled a majority of YPF after it was privatized in the late '90s, but Argentina's Congress nationalized 51% of YPF on 4 May 2012, and then-President Cristina Fernandez signed it into law, seizing much of Repsol's stock. (Repsol recently received a $5 billion settlement from the Argentine government for this prior expropriation of YPF.)

Repsol is progressively stepping out of Latin America, divesting its assets in the region.  Mexican oil company Pemex recently commissioned Credit Agricole to sell its 9.4% stake in Repsol, valued at about $3.3 billion. Pemex had disagreements with Repsol's management and was showing interest in YPF's massive Vaca Muerta shale formation.

Now that Repsol has cashed out of YPF, analysts say the Spanish company is likely to pursue acquisition opportunities in OECD countries (34 countries in the Organisation for Economic Co-operation and Development)—including the US, Canada, and Norway.

YPF moves on

In 2012, Argentine legislator Agustin Rossi said, "Repsol invested little in Argentina," Rossi said. "But it was YPF and Argentine oil that financed Repsol's growth around the world."

YPF's production used to account for over half of Repsol's production.

On 15 May, Argentina's YPF CEO Miguel Galuccio proposed  in Bolivia a G10 of Latin American state owned oil corporations to strengthen their bargaining power based on their resources and development synergy.

The company is rejuvenating its mature fields and pursuing an intensive development of its unconventional reservoirs in Vaca Muerta. With 168 working wells in the area, daily nonconventional oil production is at 19,000 bbl now and will probably increase. YPF plans to have more than 300 operating wells in the area by the end of this year.

Regarding profitability, the market is expecting YPF to report a profit of around $302 million for the first quarter of 2014, almost doubling the results of Q1 2013. The better performance owes primarily to a higher pricing policy and solid domestic demand. In February, YPF sold 282.2 million liters of gasoline, up 7.6% year over year. Premium gasoline sales volume grew 9% alone.

Categories: South America Shale

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