SA News • Yesterday, 9:48 AM
YPF: Why 2015 Will Be Bullish Despite The Drop In Crude Oil Prices
- YPF's performance this year has not been the best compared to most Argentine stocks and ADRs.
- The drop in crude oil prices paired up with Argentina's current default status are behind this performance.
- However, the new domestic pricing regulations will guarantee good profitability levels while production continues to grow.
- Plus, liquidity, solvency and cash position remain solid, which should guarantee a better performance when Argentina re-enters the international credit markets.
Why OPEC's Thanksgiving Decision Doesn't Affect YPF That Much
- YPF isn't as negatively affected by OPEC's decision to maintain crude production at 30 million barrels per day because the Argentine government shields the company from falling crude prices.
- YPF is more of a natural gas play rather than a crude oil play.
- The long-dated crude contracts have not fallen as much as the short-dated contracts.
- YPF reported pretty solid Q3 earnings, with profits rising 127% year over year and revenues rising 58% year over year..
- The quarterly report reinforces my bullish opinion on the company.
- I didn't anticipate the high capex spend..
Update: YPF Benefits From Argentina's New Investment Rules
- Argentina recently made it easier for foreign energy companies to invest in its energy assets.
- The news reinforces my bullish opinion in YPF.
- I did not anticipate that Argentina would further relax the investment rules.
- YPF and Petronas have signed a deal worth $550 million to develop Vaca Muerta’s shale oil reserves.
- The company is mulling an investment of over $1 billion to continue the project, depending on the results yielded in the pilot stage.
- Petronas is going to finance the project. It would also provide YPF the technical resources needed to develop unconventional energy.
- Argentina was declared under selective default in July and the economic consequences are starting to appear.
- However, there are many reasons to believe YPF will remain financially solid throughout the rest of 2014 at least.
- Its close ties with the government, its strong cash flow and cash cushion plus new international development agreements are among these.
- Soros Fund, Perry Capital, and Third Point all added to their positions in YPF last quarter.
- Following the smart money makes sense, as the smart money has done due diligence and can put a bid under the company.
- Given its huge reserves and cheap valuation, YPF is a solid company even without the smart money.
- Smart money investors say yes.
- Things are still a bit murky in Argentina, but uneasy investors should take solace in the fact that billionaire Dan Loeb is getting active there.
- Fortress Investment Group’s Mike Novogratz is also bullish there.
Argentina's Default Is Just Bump In The Road For YPF
- Argentina recently defaulted on its bonds.
- While the default will raise borrowing costs and decrease credit, YPF is strong enough to withstand that negative impact.
- YPF has strong operating cash flows to finance itself in the short term.
- YPF has strong international partners to finance its growth in the long term.
YPF Continues To Look Attractive But Remains High Risk
Is The Outlook For YPF Growing More Positive? (Part 2)
How To Profit From Argentina's Pending Economic Meltdown
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Yesterday, 9:48 AM
- Aregntina's YPF and China's Sinopec (NYSE:SNP) sign an MOU aimed at eventually partnering to develop oil and gas projects in the South American country.
- SNP, which is already Argentina's fourth-leading oil producer, has no experience in unconventional oil in the country, but a potential partnership could entail YPF helping develop its conventional output while the Chinese company would invest alongside YPF to raise shale oil production.
- YPF already has partnered with Chevron and Malaysia's Petronas to develop shale oil in Vaca Muerta, and has been courting international investors to boost unconventional energy output one of the world's top shale oil and gas prospects.
Thu, Jan. 15, 2:08 PM
- Argentina's YPF (YPF -2.1%) says a workers strike in Mendoza province may trigger fuel shortages in 13 provinces, including Buenos Aires and Cordoba.
- YPF says it is not dispatching trucks to half of the country, as the strike has lowered production by 6K bbl/day from its wells and its Lujan de Cuyo refinery, which produces 35% of the company’s total fuel sold in Argentina.
Dec. 10, 2014, 9:55 AM
- Malaysia's Petronas signs a $550M deal with Argentina’s YPF (YPF -3.2%) to develop the South American country’s vast shale resources, despite fears that falling oil prices could undermine the profitability of unconventional energy projects.
- The joint venture follows earlier deals amounting to $2.8B with Chevron to develop Argentina's huge Vaca Muerta shale formation; it will be similar in structure to the Chevron deal, with Petronas providing most of the financing for the initial three-year pilot project that aims to drill 35 wells which, if successful, could lead to another $10B in investments.
Nov. 17, 2014, 5:41 PM
- Argentina's YPF and Chile's ENAP say they plan to invest an additional $200M to increase natural gas production off the southern tip of South America in an attempt to raise output to ~4M cm/day from the current 2.4M cm/day.
- YPF and ENAP also extend the joint production deal beyond the existing Aug. 2016 expiration date, with the length of extension depending on negotiations between YPF and government officials.
Nov. 12, 2014, 12:40 PM
- Argentina's domestic price controls are shielding bondholders of state-run oil company YPF (YPF -0.7%) from the bear market in crude, as YPF’s $587M of notes due 2018 have returned 6.4% since oil prices began falling, the most among junk bonds of emerging market integrated oil producers which have lost an average of 20%.
- U.S. oil prices “aren’t that relevant in Argentina, and in fact domestic prices are near their highest on record," says Fitch analyst Gabriela Curutchet.
- YPF also is less exposed to global price fluctuations because it does not export crude and relies on the sale of refined products abroad for just a fraction of revenue.
Oct. 30, 2014, 6:27 PM
- YPF rose 2.5% today as Argentina lawmakers voted to approve a law revamping regulations on energy investment, which could help the country boost its oil and gas production over the next two decades.
- The package of new laws cuts the minimum investment needed for companies to be exempt from import controls to $250M from $1B.
- Argentina offers considerable energy potential, ranking no. 3 in the world in shale gas reserves and no. 4 in shale oil, yet its refining capacity is limited and it imports energy products.
- Oil majors Total (NYSE:TOT) and Chevron (NYSE:CVX) have invested in Argentina, and Exxon (NYSE:XOM) has talked with YPF about energy exploration opportunities in the country.
Oct. 9, 2014, 11:18 AM
- Ecuador, OPEC’s smallest-producing member, has signed contracts with companies including Halliburton (NYSE:HAL), Schlumberger (NYSE:SLB), Sinopec (NYSE:SNP) and YPF for a combined $2.12B investment.
- A joint venture between SLB and Tecpetrol will invest at least $702M in the block 12 oil concession, state-run Petroamazonas says; HAL will invest $579M in three concession blocks, and won a contract to boost output at fields in the block 58 concession with a minimum $240M investment.
- The deals come as the government seeks to boost crude output to offset a 15% drop in the price of its Oriente crude in the last three months.
Oct. 9, 2014, 10:59 AM
- Argentina's YPF (YPF -2.7%) says it has not struck a natural gas production deal with Russia's Gazprom (OTCPK:OGZPY) despite an earlier statement from the industry ministry that it had.
- YPF says that while it has conducted meetings with Gazprom officials to analyze various possibilities for business and collaboration, neither a confidential deal nor agreement memorandum has been signed.
- The ministry had said it received assurances from Gazprom's Alexei Miller in a meeting this week that a "confidential" $1B agreement had been reached with YPF to explore for and produce gas in Argentina.
Oct. 8, 2014, 2:45 PM
- YPF (YPF +0.9%) and Gazprom (OTCPK:OGZPY) are in talks to sign a memorandum of understanding to develop natural gas in Argentina worth at least $1B, Argentina’s Industry Minister says.
- Gazprom officials will visit YPF as soon as November, the minister says after meeting with Gazprom Chairman Alexey Miller at the International Gas Forum in St. Petersburg.
- The MOU could include Germany’s BASF (OTCQX:BASFY) unit Wintershall, the minister says.
Sep. 29, 2014, 2:10 PM
- Argentina's YPF (YPF -1.5%) and Malaysia's Petronas are negotiating a joint venture with Mexico's Pemex in a bid to become the first foreign oil companies to capitalize on Mexico’s energy reform, FT reports.
- The story details a long friendship between YPF CEO Miguel Galuccio and Emilio Lozoya, the man modernizing Pemex, as the foundation behind the discussions.
- Galuccio says the trio has the right skill set to make a big impact in mature or shallow-water fields: Petronas is an offshore expert with deep pockets, YPF’s bread and butter is to squeeze more from declining fields and it is also has shale skills, and Pemex is a shallow-water leader.
Sep. 24, 2014, 2:43 PM
- The country's disastrous two-term president Cristina Fernández de Kirchner stands to do value-seeking investors not one, but two good turns, writes Grant. Her poor governance has wrecked the economy, and by stepping down, she'll improve it (the next election is October 2015).
- Perhaps looking ahead to 2015, the Argentine Merval Index has already had a major rally over the past year or so, but there's still plenty of upside. The country's domestic stock market capitalization of $55B represents just 17% of GDP vs. a regional average of 49%.
- Kyle Bass is a fan of YPF, but Grant takes note of another name, natural gas delivery company Transportadora de Gas del Sur SA (NYSE:TGS). It's selling for an enterprise value 5x that of EBITDA vs. 6x for comparable companies in the region, but factoring in the potential profitability recovery makes the stock even cheaper.
- ARGT +8.4% YTD
Sep. 24, 2014, 2:27 PM
- Hayman Capital's Kyle Bass reveals he recently bought a large stake in YPF (YPF -0.5%), the Argentine oil company, as the best play on a new decade of economic growth in the South American country.
- Bass tells CNBC he foresees $100B-$200B of foreign direct investment in Argentina's oil fields over the next 10 years, "so YPF serves as not only a proxy to Argentina's equity market, but as the real dominant player in an energy business that we expect will be transformed over the next five, 10 years."
- He also rips "immoral" Elliott Management and other hedge funds that have invested in Argentine bonds and held out for full payment on their investments, saying they are punishing a country which can't afford not to access the international capital markets and harness its growth potential (NYSEARCA:ARGT).
Sep. 16, 2014, 4:59 PM
- Argentina’s oil-producing provinces and the federal government agree to revise a 1967 energy bill to include shale, two provincial officials tell Bloomberg.
- State-run producer YPF is seen benefiting most from the new legislation, which should ease political tensions stemming from unclear rules governing the country’s shale boom and attract investors to areas such as Vaca Muerta, the huge shale formation where companies such as Chevron (NYSE:CVX), Shell (RDS.A, RDS.B) and Exxon (NYSE:XOM) are drilling wells.
- The new bill would allow energy companies that invest $250M over a five-year period to sell 20% of production in international markets without paying export taxes and to keep some export revenue outside the country for shale and conventional projects.
Sep. 15, 2014, 3:37 PM
- Occidental Petroleum’s (OXY +1.1%) chemical unit agrees to pay $190M to cover its liability for the cleanup of the Passaic River in northern New Jersey, state officials say.
- OxyChem is the legal successor to Diamond Shamrock, which was found to have intentionally dumped industrial waste in the river for decades, according to the AG's office; if approved by a judge and state regulators, the OXY payment would mean New Jersey has recovered $355M for the work.
- OxyChem says it will seek reimbursement from YPF subsidiary Maxus Energy, which OXY says is financially responsible for claims against OxyChem in the litigation.
Aug. 28, 2014, 7:42 AM
- Argentina's YPF and Malaysia's Petronas have agreed to jointly develop shale oil in Argentina's Vaca Muerta formation and will sign a deal today, WSJ reports.
- The deal is believed to include an initial investment of more than $500M, and state-run YPF and Petronas could invest up to $9B over the next decade to develop the full potential of the La Amarga Chica field within Vaca Muerta.
- The deal is expected to be structured similarly to a joint venture YPF signed last year with Chevron, which are developing the nearby Loma Campana field and has become the second biggest producer of unconventional oil outside North America
Aug. 14, 2014, 3:28 PM
- Argentina's YPF (YPF -2.1%) says it discovered oil at a well in the Agrio formation in southern Patagonia, the third shale find in the country in four years.
- CEO Miguel Galuccio told reporters at a Buenos Aires technology fair that YPF has begun testing the Filo Morado well, but did not provide the well’s depth or other details.
- The Agrio formation is located in Neuquen basin, the site of the huge Vaca Muerta shale gas deposit where YPF and Chevron are producing crude.
YPF vs. ETF Alternatives
YPF Sociedad Anonima is an integrated oil & gas company. It upstream operation consists of exploration, development & production of crude oil, natural gas & LPG. Its downstream operation includes refining, marketing & distribution of oil, among others.
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