Argentina's YPF (YPF +1.2%) has enough cash and local funding sources to weather a sovereign default that has blocked it and other companies from international debt markets, CFO Daniel Gonzalez said in today's earnings conference call.
The CFO said YPF had 11.4B pesos ($1.4B) in cash on its balance sheet at the end of June, and the company can lean on its credit lines with local banks, tap a $1B credit line with the federal government and, if necessary, adjust its capital spending.
"We don´t have any plans for accessing international markets for now," Gonzalez said, but "you shouldn't be surprised" if YPF re-enters the market to rebuild its cash position if the sovereign default situation gets resolved.
The International Swaps and Derivatives Association declared Argentina in default, a move which could trigger up to $1B on credit default swaps. Next up is an ISDA auction to settle outstanding CDS deals.
Argentina bonds extended losses after the ISDA action, and the Global X Funds Argentina ETF (NYSEARCA:ARGT) is off 2.1% on the session.
A selection of ADRs: Alto Palermo (APSA), Banco Macro (BMA -2.4%), BBVA Banco Frances (BFR -1.4%), Edenor (EDN +2.3%), Pampa Energia (PZE +0.1%), Telecom Argentina (TEO -0.6%), Tenaris (TS -0.1%), Ternium (TX -0.7%), YPF (YPF -0.9%).
Argentina's default won't harm efforts to become self-sufficient in oil and natural gas by tapping vast shale reserves, according to Seaport Group and state energy company YPF (YPF -3.9%).
YPF oversees Argentina’s shale oil and gas reserves, and thus will have continuous access to financial markets, Seaport says, adding that YPF may structure securities where its earnings are escrowed outside the country for use in repaying debt and receive attractive terms.
YPF says it will generate enough cash to finance operations for the next 12 months and has access to new funding sources; the company has said it needs to fund a $35B investment plan over the next five years.
A one-day strike by 23K workers in the energy-rich Neuquen basin will cost YPF (YPF +2.9%) as much as $12M and cut production by 160K barrels of oil and 6M cubic meters of gas, the company says.
The workers are striking as provincial governors and federal authorities discuss changes to Argentina’s hydrocarbons law; the outcome will determine how revenue from the Vaca Muerta formation, which holds the world’s fourth-biggest shale oil reserves and second-largest shale gas reserves, are distributed.
The Neuquen basin is responsible for 40% of Argentina’s oil output and 56% of natural gas output, YPF says.
Dan Loeb's Third Point hedge fund is renewing a bet on Argentine government debt, expecting the country will reach a deal with creditors to resolve claims from its 2001 default by the end of the year, and is taking a stake in state-controlled oil company YPF (YPF +5.2%).
"We are in the midst of a critical inflection period for the country: If the government settles with its hold-out creditors, Argentina will regain access to global capital markets,” according to the hedge fund's Q2 letter to investors.
Third Point says Japan has been the biggest source of losses this year, but the firm is still finding opportunities in the country and expects macro conditions that have been headwinds to become more favorable toward the end of the year.
Earlier: YPF pops as Third Point is said to increase stake.
American depository shares of YPF rose to two-year highs today following reports Argentina's state oil producer said its assets cannot be seized by creditors still trying to collect on a 2002 default on Argentine government debt because it is an independent company.
A U.S. appeals court last week ruled Argentina could not continue to pay creditors who agreed to restructure their bonds after the default on $100B in debt unless it also paid $1.33B to smaller groups of hedge fund managers demanding full payment on the bonds, but YPF says it is "an independent company and... Its assets don't belong to the Republic of Argentina, and as such cannot be embargoed by the Republic of Argentina's creditors."
ADRs of oil and gas explorer YPF, bank BBVA and Latin America-focused wireless firm NII Holdings (NASDAQ:NIHD) fell sharply today in reaction to a setback for Argentina's defaulted bonds which sent the country's markets reeling, taking select U.S.-listed stocks lower.
The U.S. Supreme Court today left intact rulings that may force Argentina to pay billions of dollars to holders of repudiated bonds, rejecting an appeal in a case that has blocked the country from international debt markets for more than a decade and could prompt the government to default for a second time in 13 years.
Argentina is said to be considering extending tax incentives put in place last year to attract investment in the energy industry, as the government begins to discuss a new oil law with provinces.
The proposal reportedly would offer energy companies that invest $250M over a five-year period the ability to sell 20% of production in international markets without paying export taxes and the ability to keep some export revenue outside the country; the bill would lower the target for the incentives from $1B.
The new law would seek to end political tensions derived from unclear rules and lure more investors to Vaca Muerta, where Chevron (CVX) signed a final joint venture agreement with state-run energy company YPFearlier this year; Exxon Mobil (XOM) also has a strong presence at the giant shale formation.
The oil worker’s union is protesting regulation allowing YPF, Royal Dutch Shell (RDS.A, RDS.B) and Petrobras (PBR) to import gasoline at subsidized prices, which the union says causes three small refineries in oil-rich Neuquen province that employ ~700 workers are paying more for crude than large producers and risk shutting down.
Governors of the three provinces holding Argentina’s huge Vaca Muerta shale oil reserves say they will jointly challenge a push by state-owned YPF (YPF -1.2%) to take control of the auction and renewal of licenses.
The fight highlights political tensions caused by unclear rules governing Argentina’s budding shale boom; for prospective license holders, a single federal system would remove the need to negotiate with two levels of government.
YPF owns ~37% of Vaca Muerta concession areas, most of which are coming up for renewal in the next few years; the Argentine government has invited foreign companies including Chevron to help YPF’s shale exploration efforts.
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.