YPF CEO Unveils Growth Plan, Says Company Moving Past Repsol Controversy

NEW YORK - The new chief executive of YPF SA Thursday unveiled a plan to boost capital spending and increase petroleum output, and said the company was moving past the recent nationalization from Spanish heavyweight Repsol SA.

YPF Chief Executive Miguel Galuccio acknowledged that some prospective investors are reluctant to support the company due to 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," Galuccio said. "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, Argentina President Cristina Fernandez expropriated a controlling interest in YPF that had been held by Repsol. The move was roundly criticized by Repsol and European officials. Repsol is trying to recover some $10 billion from Argentina in various judicial cases.

YPF unveiled a trove of figures on capital spending and production targets which collectively painted a picture of an active company that seeks growth.

The company plans $34.1 billion in new capital spending in 2012-2017 after boosting spending on oil, natural gas and refining sectors. YPF said it would achieve 32% growth in oil production between 2013-2017 and a 37% jump in diesel and other refining-product output during this period. Many of the projects involve unconventional petroleum resources such as shale gas.

Mr. Galuccio said the YPF expropriation was an exceptional situation for Argentina and doesn't show that the country is bent on expropriating assets from other foreign companies. Rather, the move stemmed from YPF's status as a strategic asset. Argentina needed to take control of the company in order 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."

A key question is how the company plans to finance the massive capital program. Mr. Galuccio said 80% of the money will come from cash flow and the rest will need to be raised in debt.

Mr. Galuccio said the company has held talks with a number of local and international investors. The company has signed a $500 million memorandum of understanding with one local investor.

A Repsol news release said the company "made significant progress toward strategic agreements" with Chevron Corp. and China's CNOOC Ltd., 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 the company would seek an unspecified sum of financing through the issuance of local bonds next week. He said the company planned a nondeal roadshow in September to "test the market" looking towards an international issuance in the fourth quarter or the first quarter of 2013.

Copyright (c) 2012 Dow Jones & Company, Inc.


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