NEW YORK.- A group of 15 people stop at the height of the 11th of Wall Street in this city, while the guide who accompanies them with an umbrella explains that they are in front of the New York Stock Exchange (NYSE). The imposing marble building today displays a large canvas on its front, which shows the image of sunrise in an oil field and has the large white letters of YPF. Below, three flags hang: the United States, Argentina and YPF, and another canvas that says Unlocking Argentinas’s energy potential (Unlocking Argentina’s energy potential). It bears the signature of “30 years, YPF listed on NYSE”.
“They don’t know what it cost us to hang him,” he joked Jorge Arguello, the Argentine ambassador to the United States, who arrived by car on a four-hour drive from Washington, minutes before 12 noon. The official was invited by the YPF authorities, the president Pablo Gonzalez and the CEO Paul Iulianoto celebrate that 30 years ago the oil company began to be listed on the Stock Market. The starting price of the share on July 1, 1993 was US$20.25.
During this time, the State sold its stake in the oil company (1999), then expropriated the majority shareholding (2012), but the company never ceased to be listed on the NYSE, which forced it to continue presenting its quarterly results and answering questions from the investors. Today, the YPF share is worth half what it was 30 years ago, US$10.67and the company has a total market valuation of $4.197 billion.
Before ringing the bell to celebrate the 30th anniversary, González, Iuliano and the Chief Financial Officer (CFO), Alejandro Lew, made a presentation on the financial results for 2022 and anticipated that YPF will invest US$5 billion this year. Of this total, US$2.3 billion will be earmarked for unconventional production (Vaca Muerta), US$1.3 billion for conventional production, and US$1.1 billion for the refinery business. In turn, for the next few years, YPF’s production will focus on oilto which 65% of the total investments of the upstream. To move forward with investments, the oil company will go to the local market to seek financing.
The Minister of Economy, Sergio Massafollowed the event by Zoom from Buenos Aires and announced that YPF will distribute dividends to its shareholders for the first time since 2019. The Argentine State has 51% of the shares. The decision will be finalized in May. The minister also reiterated that he will send to Congress a bill to facilitate investments in liquefied natural gas (LNG), although he did not specify a date. The project promises to provide facilities for access to the exchange market.
After the presentation, the organization opened the event to questions. “With the elections that are this year, What are the challenges that the company has in case Argentina continues to face economic difficulties, more inflation and devaluation?asked an analyst at the investment bank UBS.
Lew, the responder, asked to repeat the question before formulating an answer. I don’t know if I understood the question correctly. It’s a political question and there are multiple scenarios that could occur, I’m not the person to answer. If the question is related to what we can expect from YPF’s growth in the different scenarios, as our president, the CEO and Massa have already said, the company is very resilient. The focus of the country is to monetize the energy sector so that it can transform Argentina’s balance of payments. The reality for the sector and for YPF should be positive in any political scenario. We believe that the sector should be part of the solution to any situation, even if it is complicated,” said the CFO of the oil company.
The following questions were focused on future projects of hydrogen, LNG and lithium, which the company has in plans. There was also a query about the trial for Maxus, where YPF inherited a lawsuit for environmental contamination from a company it bought in 1995. “The trial was going to start these days and was scheduled to end at the end of April. Recently, the different parties requested the Court to postpone the start until the end of June. It is the latest information that we can comment on,” Lew said.
After announcing an investment of US$5 billion, González and Iuliano spoke to journalists about the price of fuels, the new Vaca Muerta that seeks to explore in Santa Cruz, Palermo Aikeand about the milestone of YPF exporting oil again after 15 years.
First of all, Iuliano indicated that the strategy for this year in terms of oil and gas prices is “follow the devaluation as closely as possible”. For this, “monthly adjustments” will continue to be applied in relation to inflation, to “run as close as possible”. The CEO indicated that current fuel prices are between 15 and 20% below the “import parity” (import prices).
YPF, together with the rest of the refinery companies, agreed with the Government to participate in the “Fair Prices” program, which meant that fuel prices increased 4% in December, January and February, and 3.8% this month. During this time, prices rose below inflation and currency devaluation.
Second, managers announced that by mid-May, YPF could export oil again after 15 years. It would be through the Trasandino Pipeline (Otasa), which had been “closed” in 2007. Since then, shipments to Chile have been cut off.
“The minimum that is needed to fill the pipe is between 30,000 and 40,000 barrels, which is what we are going to start exporting between May and June. Starting in September, the Vaca Muerta Norte pipeline will be fully operational [entre Añelo y Puesto Hernández], which will allow us to expand our export capacity to 110,000 barrels. Surely, 70,0000 barrels end up being exported because it will depend on the demand from Chile”, he indicated. YPF shares Otasa with US oil company Chevron and Chile’s Enap.
In relation to exports, the oil company is enthusiastic about the explorations that they are going to start at Palermo Aike, which is an unconventional reservelike Vaca Muerta, but located in Santa Cruzvery close to the port of Río Gallegos.
“We can replicate a lot of the learning curve that we’ve done at Vaca Muerta in Palermo Aike, which is another shale that has light oil. It has a temporary advantage over Vaca Muerta, which is that it already has the infrastructure to reach export ports quickly, because there is idle capacity in the southern transportation system.. It is an opportunity to capture quickly, if we can do it efficiently and if the productivity of the wells that we are going to do accompanies us”, said Iuliano.
“The idea is to start drilling the first wells before the end of the year and then we are going to use a time between three and six months to test productivity. After that, we can think about putting it in value. The objective of this is to have a different alternative to Vaca Muerta and it is a value that we can contribute to the country”, added the CEO.
Regarding the LNG bill, González said the company collaborated with his vision with the Ministry of Economy to design it and indicated that “In the coming weeks it will be sent to Congress”. The main point of the project is that it allows companies to access the exchange market.
“We need to build another gas pipeline similar to Néstor Kirchner’s, 620 kilometers long and transporting a similar volume. In addition, we have to bring in the Petronas liquefaction vessel first, and then build the liquefaction plant. For that we need access to the exchange market. The project has advantages that the regulatory framework will grant. Behind that, comes the Hydrogen project”, said González.
The president is optimistic that the project will be approved in Congress. “The LNG project has to be a state policy. We continue with the offshore project that was designed by Iguacel [exsecretario de Energía durante el gobierno de Mauricio Macri]. There has to be fiscal stability for a long time. You have to make a gas pipeline, bring a ship and build plants. With a strong tailwind, this project would only begin to generate LNG exports within four years”, concluded the president of YPF.