Repsol calls Argentina's nationalization of YPF 'unlawful'

(Story updated with additional details Apr. 18)

Argentina’s government decision to take control of energy company YPF SA, controlled by Repsol YPF SA, prompted Repsol on Apr. 17 to issue a statement from Madrid saying it will take all legal measures to preserve the value of its assets and interests of its shareholders.

“The unlawful expropriation of YPF does not affect the growth capacity of any of Repsol’s businesses outside Argentina,” Repsol said in a presentation posted on its web site.

Argentina President Cristina Fernandez de Kirchner suggests a change in control of YPF, by which 51% of YPF Class D shares, all owned by Repsol, are declared public interest and subject to expropriation.

She plans to submit proposed legislation to Congress outlining this. The government approved a decree on Apr. 16 establishing the administration of YPF for 30 days with the Minister of the Government as controller.

Meanwhile, Spanish Industry Minister Jose Manuel Soria said, “With this attitude, this hostility from the Argentine authorities, there will be consequences that we'll see over the next few days. They will be in the diplomatic field, the industrial field, and on energy.”

Repsol said YPF is worth $18 billion, and it would be seeking compensation on that basis. Repsol said it owns 57.43% of YPF.

“This battle is not over,” Repsol chairman Antonio Brufau said.

The move toward nationalization comes while Argentina is working to attract investors to help develop shale fields, particularly the Vaca Muerta formation.

Repsol estimates Argentina could double its production by investing $25 billion/year for 10 years to develop its shale formations.

Argentina’s production averaged 551,000 b/d of oil and 3.3 bcfd of gas in 2011 (OGJ, Feb. 13, 2012, p. 31).

Ryder Scott Co. LP, Houston, estimated the resource potential of the 7.4 million acre play based on 116 million bbl of oil equivalent proved, probable, and possible reserves, 1.525 billion boe of contingent resources, and 21.167 billion boe of prospective resources.

As of January, YPF had drilled 28 wells and recompleted one well. Those included 24 vertical wells with two to four-stage hydraulic fracturing. Twenty wells produced with initial flows of 180-600 boe/d. YPF is evaluating four horizontal Vaca Muerta shale wells it drilled in late 2011 (OGJ Online, Mar. 27, 2012).

Contact Paula Dittrick at paulad@ogjonline.com.

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