Argentinean government takes over the reins of YPF SA

The government of Argentina is set to take over the reins of oil and gas producer, YPF SA.  The state will allow provincial government representatives to sit in the company’s board and take part in the formulation of company investment strategies.  YPF SA is the biggest oil and gas production company in Argentina.

The takeover will be formally announced by Argentinian President Cristina Kirchner, during a meeting with governors of provinces with O&G production according to Governor Jorge Sapag.

He also revealed that both the public as well as private sectors will have a stake in the company.

Shareholder composition prior to government takeover is 57.4% Repsol YPF (of Spain), 25.5% Eskenazi clan (Argentina), and 17.1%, public sector. YPF shares are traded in the New York and Buenos Aires stock exchanges.

Under the new ownership, YPF’s board will be composed of 25 directors. The private sector will be invited to infuse new capital to the company for increased oil investment, according to news relayed by El Cronista.

Argentina’s oil output has been decreasing as its oil fields are already near maturity.  Consequently, the state has resorted to importing more oil to keep up with demand.

President Kirchner stated that private domestic oil firms no longer invest enough funds in oil exploration, and that this has reduced Argentina to a mere net energy buyer.  Detractors however blame Kirchner, referring to her stringent policies on crude oil prices and lack of incentives as the culprits.

In the past weeks, Kirchner had authorized the cancellation of some oil franchises owned by oil and gas firms.  Unfortunately for YPF, most of these franchises which operate valuable oil fields are owned by the company.

In this light, Antonio Brufao, Chairman of YPF Repsol, disclosed that he will soon seek audience with Argentina’s officials.

The unfavorable political situation in the country prompted Deutsche Bank to push down YPF shares rating: from buy, to hold.

“Since the start of the conflict between YPF and the government, we were hopeful for a better resolution, but the removal of concessions and the possibility of the government becoming a shareholder of the company indicate that the upside is limited from current levels, at least in the short term,” say bank analysts.

Trading results at the Buenos Aires stock exchange show that YPF shares closed 1.6% lower on Tuesday.  ADRs dropped to $22.22 resulting to an $8.7B market capitalization for YPF SA.