YPF: Is The End Near?

Via The Financial Times, a look at how Argentina’s turmoil is affecting its largest oil company, YPF:

As chess players know, the queen is the most powerful piece, able to advance a number of steps in several directions at any time.

It looks like Cristina Fernández, Argentina’s president has been honing her chess skills as the endgame for YPF, the country’s biggest energy company, nears.

Fernández, who is sometimes dubbed “Queen Cristina”, has indeed been advancing in several directions through a variety of ways in recent weeks – criticising YPF openly, demanding higher production and investment, and ensuring that pro-government provincial governors teach YPF a lesson by stripping it of concessions.

As the expected moment of truth neared on Monday, YPF stock has crashed again – falling 12 per cent in New York.

Epectations are running high that Fernández will shortly announce moves to achieve a long-held aim: bringing the former oil monopoly back under state control. It is currently 57.43 per cent held by Repsol of Spain with 25.46 per cent owned by the Argentine Ezkenazi family. Some reports suggest April 12 will be the day.

Giving credence to the drumroll of expectations is the fact that Pagina 12, a pro-government paper, has reported that the government is preparing to take control of Argentina’s biggest company.

A string of Argentine provinces have recently stripped YPF of several assets including, on March 31, its most productive field. YPFhas lost 12 licenses in five provinces since March 14.

This report even noted that Spain could acquiesce – if the price was right.

From Cronista:

It has emerged that even the King of Spain, Juan Carlos, told Cristina that if the official decision is to go after YP, Repsol will not oppose it, but they want to sell it at market prices.

If the question of just how Argentina could find the money to fund a takeover is unclear (suggestions are that it would declare the company in the national interest, and buy stakes both from Repsol and the Ezkenasis), how it would pay for the giant investments needed is even less evident.

YPF has suggested that developing a shale industry in Argentina (Argentina is believed to be home to the world’s third-biggest reserves of so-called shale hydrocarbons, trapped deep underground in bedrock) would cost $250bn over a decade – and the government clearly does not have that kind of cash.

And even though advancing on YPF would likely play well domestically, it would surely give international investors pause for thought.

The slow-moving chess game that is YPF’s future is nearing its climax. But an audacious swoop on YPF looks far from being a masterstroke, even for Argnetina’s political Grand Mistress.

This entry was posted on Thursday, April 5th, 2012 at 1:47 pm and is filed under Argentina.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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