(This article was originally published Thursday.)
By John M. Biers and Taos Turner
NEW YORK & BUENOS AIRES--The new chief executive of YPF SA
(YPF, YPFD.BA) unveiled plans to boost investment and raise
petroleum output, and said the company is moving past the recent
nationalization from Spain's Repsol S.A. (REPYY, REP.MC).
YPF Chief Executive Miguel Galuccio acknowledged that some
prospective investors are reluctant to support the company over the
Repsol controversy, but predicted those concerns would vanish as
the company shows strong results.
"After the expropriation, there was a period when people are
going to be reluctant," Mr. Galuccio said Thursday in a news
conference. "That fear is going to disappear with time as long as
we show the plan is solid and we show we are delivering
results."
In April, Argentine President Cristina Fernandez began the
process of expropriating YPF. Repsol and European officials roundly
criticized the move and Repsol is trying to recover some $10
billion from Argentina in various judicial cases.
So far, Argentina hasn't compensated the Spanish company and it
is unclear if the government plans to so do.
Argentina's government has placed a great deal of trust in Mr.
Galuccio, a former Schlumberger Ltd. (SLB) executive, and has asked
him to boost production at YPF as well as help the country reduce
its need for imported energy.
Mr. Galuccio unveiled a trove of figures on capital spending and
production targets which collectively painted a picture of an
active company that seeks growth.
YPF plans to invest $37.2 billion through 2017 to boost spending
on oil, natural gas and refining. Mr. Galuccio said YPF will raise
oil production by 32% between 2013-2017 and increase diesel and
other refining-product output by 37% during this period. Many of
the projects involve unconventional petroleum resources such as
shale gas.
Mr. Galuccio said 80% of the money will come from cash flow from
it and another partner. The rest will come from selling debt.
Mr. Galuccio said the assumptions underlying his plans are
"conservative" and that even without external financing YPF would
be able to invest $24.7 billion through 2017. That could jump to
$40.4 billion if YPF forms partnerships and obtains external
funding, he said.
Mr. Galuccio said YPF's expropriation was exceptional and
doesn't show that Argentina is bent on expropriating assets from
other foreign companies. Rather, the move stemmed from YPF's status
as a strategic asset and it was necessary to boost output and
reduce the need for energy imports, he said.
"The action was the right action to be taking," Mr. Galuccio
said of the expropriation. "It's particular to YPF. It's particular
to the need of the country."
YPF has held talks with local and international investors and
the company has signed a $500 million memorandum of understanding
with Eduardo Eurnekian, a local investor.
A YPF news release said the company "made significant progress
toward strategic agreements" with Chevron Corp. (CVX) and Bridas
Corp., which is half owned by China's Cnooc Ltd. (CEO), among
others. Mr. Galuccio said one model would be a 50-50 partnership
whereby a strategic partner would garner 50% of the petroleum
output.
During the news conference, which was held in Buenos Aires but
webcast to reporters in New York, Mr. Galuccio characterized the
Chevron talks as "quite early days." He said Chevron held appeal
because of its experience in shale oil and gas and other
unconventional projects.
Mr. Galuccio said YPF would seek an unspecified sum of financing
by issuing local bonds next week. He said the company plans a
nondeal roadshow in September to "test the market" looking towards
an international issuance in the fourth quarter or the first
quarter of 2013.
Mr. Galuccio also said YPF had made five new unconventional
shale discoveries. But a Repsol spokesman said two of the areas,
D-129 in Chubut, and El Orejano in Neuquen, had been discovered by
Repsol before the expropriation and that Repsol was preparing to
announce the discoveries before the takeover.
YPF spokesmen replied by saying if Repsol had made the
discoveries it would have been required to report them at the time
to the U.S. Securities and Exchange Commission.
Mr. Galuccio said that even without external funding YPF will be
able to raise oil and gas output by 4% annually through 2017. With
such funding, output will rise by 9% annually to 641 million
barrels of oil equivalent, he said.
Argentine oil and gas production has been declining over the
past decade amid price caps, shifting government policies and, most
recently, a ban on sending dividends abroad.
But Mr. Galuccio said new regulations aim to boost growth in the
sector so it can meet domestic demand for energy. He cited a recent
decision to raise gas wellhead prices by 400% as an indication the
government is moving to encourage investment in energy.
Write to John Biers at john.biers@dowjones.com