MercoPress. South Atlantic News Agency

Argentina has the (Central bank) cash to take over YPF, says Barclays Capital

Vice President Boudou warned Argentina wants oil companies that make long term investments

Argentina has the cash reserves to make a tender offer for Repsol-YPF SA local unit, the country’s largest energy company, and will likely put further pressure on the industry to boost output, has stated Barclays Capital.

“We are not in the camp of those that think that Argentina cannot afford to make an offer to Repsol and the rest of the shareholders,” New York-based analyst Sebastian Vargas said in a note to investors. Using central bank reserves to make an offer for YPF SA “should also be considered,” he said.

Argentine President Cristina Fernandez is increasing pressure on oil companies to invest more after fuel imports doubled to 9.4 billion dollars in 2011. In October, the government ordered oil and mining companies to repatriate export revenues and in November opposed a dividend payment for Buenos Aires-based YPF, as it seeks to stem capital flight. YPF was also one of nine companies that lost financial incentives for oil exploration and production, the government said February 3.

“We think the administration will increase intervention in the energy sector to guarantee an increase in production and investment,” he said. “The conflict with Repsol YPF is just the tip of the iceberg of a much more complex energy problem.”

YPF American depositary receipts have slumped 29% in the past 12 months on concerns the government will nationalize YPF. The government may pay book value of 11.7 billion for the asset and that might be enough to convince Repsol to accept an offer, Vargas said.

The Argentine government has discussed nationalizing YPF, Pagina/12 newspaper reported a week ago, without saying where it got the information. Pagina/12 regularly runs interviews with top government officials such as Vice President Amado Boudou, who did not rule out the possibility of nationalizing YPF, Vargas said, citing recent media minister interviews.

Nationalization would have “sizeable political gains” for CFK and would gain Congressional approval, Vargas said. The nationalization of YPF would have a “very negative effect” on credit markets, he said.

Repsol CEO Antonio Brufau, met Argentina’s Planning and Economy ministers on Feb. 6 to discuss government criticism of YPF. But on Wednesday YPF reported that it had invested a record 13.3 billion Pesos (3.1 billion dollars) in 2011 and added 137 million barrels of oil equivalent to its reserves. That gave YPF a so-called reserve replacement ratio of 160%, the corporation said in a regulatory filing.

Argentine oil production dropped by 12% between 2003 and 2010 even as consumption gained 38%, according to Vargas. Gas output dropped 2.3% in the period and reserves fell to the lowest since 1980 as demand rose 25% amid an expanding Argentine economy, Vargas said. Argentina will have to increasingly rely on oil imports to boost its economy, he said.

Repsol, Spain’s largest energy company owns about 57% of YPF, while Argentina’s closely held Petersen Group owns about 25%. The Petersen Group owned by the Eskenazi family, bought into YPF in 2008 and became the operator of the company. Under the terms of the acquisition agreement with Repsol, YPF pays 90% of its annual net income as dividends.