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YPF Sociedad Anonima (YPF) |
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WIKI ANALYSIS
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YPF Sociedad Anonima (YPF SA) is Argentina's premier oil company and a subsidiary of the Spanish based Repsol YPF. Their recently announced exploration programs projected for the 2010-2014 period1 and significant dividend payment indicate its sound financial footing.
Influenced by shifts in the oil (and more generally energy) markets YPF is also a part of the Chemical and Marketing industry. As such it is also subject to the rising popularity in liquefied petroleum gas for its environmentally sound qualities. The company has a very strong social outreach program that furthers its market penetration.
Company Overview
YBF is a multi-industry company largely popular with the government and the people of Argentina.
Business and Financial Metrics
- On Nov 4 2009 YPF announced a dividend payment of $6.15 pesos argentinos. A yield of about 14.41%. A noticeable figure considering that YPF, like most foreign stocks pays out a dividend twice a year.
- Net sales in 2008 were 34.958MM despite lower oil prices in the world markets (as compared to oil prices in 2007). This was due in large part to the high prices YPF was able to secure in the internal Argentina markets. It is also important to consider that despite lower oil prices, the price of aerospace fuels continued to rise.
- The overall level of exports decreased to 7.288MM in 2008 in large part due to the diminishing foreign demand for natural gas and crude oil.
- Exploration costs have risen to 162MM due in large part to new drilling projects in the western region of Argentina. This fact, along with the plan outlined by the company to continue exploration in an effort to expand the amount of known reserves also draws attention to the fact that most of the Argentinian coast is still largely unexplored.
- The company extracted 328,000 BPD. A reduction of 2007s production of 334,000 BPD. Over the same two year period the cost of processing a barrel of oil increased $2/barrel as a result of new government imposed requirements (Resolucion 394/07 2)
- The Chemical division of the company grew a 135.6% to 1.178MM. This is due, in large part, to improved margins in the aromatic products lines and the company's participation in Profertil S.A. (a nitrogen fertilizer producer 3)
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Business Segments
The company is divided into four business segments: Exploration and Production (Oil), Refinery and Marketing, Chemical, and General Management. Note: The numbers in the following section are as reported for the last trimester of 2009 5.
- Exploration and Production (39.287% of Total Sales): Dedicated to the extraction and sale of crude oil and natural gas.
- Refinery and Marketing (52.886% of Total Sales): Concerned with the refinement of crude oil and sale of its derived products: gas and naphta.
- Chemical (5.609% of Total Sales): Over 50% of this segment's production is exported. The main products (Quimica YPF manufactures over 40 different products) are aromatics like anhydride MAN, PIB, and LAB 6.
- General Management (1.415% of Total Sales).
Key Trends and Forces
Gas and Oil Decreasing Prices: External vs. Internal
Following the peak in the $/bbl on July 11,2008 of $147.27 barrel oil prices have decreased considerably. OPEC announced its decision to keep its production levels unchanged on Dec 22, 2009 citing concerns regarding a now two year period in which world oil demand has declined 8. YPF has a sizable internal market as well which counteracts the general declining trend as it has been able to obtain higher than average prices for its oil inside of Argentina 9.
Latin American and Argentinian Demand for Energy
Latin American demand for oil is expected to increase to 7.66MM barrels by 2010. Demand for oil and gas is increasing in Latin America where most predictions - including the EIA's - expect global demand for oil to decrease. Further, in regards to the Argentinian oil industry the country now ranks 5th of 9 according to the BMI Business Environment Ranking Matrix.10
Diversifying using geography and currency
The dollar is currently struggling between maintaining enough value to keep global business transactions and national reserves in dollars and cheap enough to sustain American exports 11. As signs of economic growth are seen all over the world, historical data shows that commodities will rise. This on top of the traditional regularity with which foreign companies pay dividends suggests a growing demand for high yield foreign stocks.
Remaining Reserves
Argentina retains 2.7BB barrels of oil of proven reserves and is the third largest oil producer in Latin America. Further, since 2000 Argentina has established itself as the largest natural gas producer.12
Oil Market Liquidity
The U.S. Commodity Futures Trading Commission seeks a compromise between limiting speculation in the energy (oil) markets and maintaining liquidity. As it stands right now position limits are set by exchanges like the New York Mercantile Exchange (NYMEX) and the Chicago Mercantile Exchange (CME). Tighter restrictions on energy contracts could push investors seeking liquidity to foreign markets and foreign companies like YPF.
Competition
Though YPF accounts for about 39% percent of the oil production in Argentina, there are other major players as well. Argentina's oil industry is open to the private sector (national and foreign). YPF was privatized only after having its beginnings as a government owned agency 12. Its main competitors are:
- Pan American Energy - The second largest oil producer in Argentina has diversified exploration to include both Argentina and Bolivia.Their production increased 80.38% in the 2000/2006 period 13.
- Chevron Texaco: Its underwater installations maintain production constant at the El Trapial Field, the company has a lubricant blending plant in Buenos Aires, sells its products inside and outside of the country and supports social and educative programs throughout Argentina 14.
The first two are considered competitors in large part due to their large market share. Both Chevron Corporation (CVX) and Pan American Energy as well as YPF have plans for exploring off shore reserves.
- Petrobas Energia - Considered a competitor not only for its increasing market share but also because of its recently acquired permits to explore the CAA-1 and CAA-8 blocks. The company (Petrobras) has pledged an initial investment of 6.5MM and invested over 1.8BB in the 2003/2007 period15.
References
1 - http://www.chacodiapordia.com/2008/noticia.php?n=37678
2 - http://200.69.252.41/hypersoft/Normativa/NormaServlet?id=15120
3 - http://www.profertil.com.ar/english/index.jsp
4 - https://imagenes.repsol.com/ar_es/Estados%20Contables%20-%20Anual%202008_tcm51-519669.pdf
5 - https://imagenes.repsol.com/ar_es/Estados%20contables%20YPF%20S_tcm51-551323.pdf
>6 - http://www.ypf.com/ar_es/todo_sobre_ypf/conozca_ypf/ypf_en_el_mundo/quimica/introduccion/default.aspx
7 - http://www.profertil.com.ar/english/index.jsp
8 - http://www.opec.org/opecna/Press%20Releases/2009/pr132009.htm
9 - https://imagenes.repsol.com/ar_es/Estados%20Contables%20-%20Anual%202008_tcm51-519669.pdf
10 - http://www.tenergias.com.ar/Joomla/index.php/faq/48-1/516-preven-una-mayor-demanda-petrolera-en-el-mundo-durante-el-proximo-ano.html || http://www.wtexec.com/cms/content.jsp?id=com.tms.cms.section.Section_bookstore_argentinaoilgas
11 - http://www.independent.co.uk/news/business/news/the-demise-of-the-dollar-1798175.html
12 - http://www.mbendi.com/land/sa/ap/p0005.htm
13 - http://www.panamericanenergy.com/
14 - http://www.chevron.com/countries/argentina/
15 - http://www.hoy.com.ec/noticias-ecuador/petrobras-se-adjudico-dos-areas-exploratorias-en-patagonia-argentina-380206.html
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