BUENOS AIRES - Argentina's largest oil and gas producer, state-run YPF SA, expects to boost investment in its operations by 60% this year as it seeks to lift production, YPF Chief Executive Miguel Galuccio said Monday.
Argentine President Cristina Kirchner nationalized YPF last year and tapped Mr. Galuccio to reverse years of declining output. YPF invested 16.48 billion pesos ($3.25 billion) in 2012, an increase of nearly 26% from the preceding.
YPF sold about ARS9.4 billion in debt on the local capital market last year to fund a portion of that investment.
"We are going to need volumes of financing much greater than in 2012," Mr. Galuccio said at a press conference.
The executive said YPF would tap global capital markets if the opportunity arises. He also hinted that equity could play a bigger role in YPF's investment program this year.
YPF said Monday its net profit fell 12% in 2012 to ARS3.90 billion due to losses at subsidiaries and accounting factors. Operating cash flow soared 36% to ARS17.3 billion.
Oil output rose 2.2%, compared to a 7.6% drop the previous year. The decline in natural gas output slowed to 2.3%.
YPF's shares traded in New York rose 0.8% to close at $14.77 Monday, giving the company a market capitalization of about $5.8 billion. Its ADR hit a 52-week low of $9.21 last November.
Last year, Mrs. Kirchner formally expropriated a 51% stake in YPF from Spain's Repsol SA in a dispute over investment. Mrs. Kirchner blamed the Spanish company for Argentina's falling oil and gas output, saying that Repsol bled YPF dry through an overly generous dividend policy that left the company without enough money to invest in exploration and production.
Repsol has denied those accusations and is seeking about $10 billion in compensation for its YPF shares.
Analysts say that Argentina could become an energy exporter again and provide consumers and industry with cheap natural gas if it is able to replicate the shale boom the U.S. has enjoyed in recent years. The South American nation is thought to be home to the world's third-largest shale gas reserves after the U.S. and China, with some 774 trillion cubic feet of recoverable gas, according to U.S. Energy Information Administration estimates. Argentina is also thought to have significant quantities of shale oil.
But getting those hydrocarbons out of the ground and to consumers will require billions of dollars that neither YPF nor Mrs. Kirchner's government have on their own.
Mr. Galuccio has been courting international partners to boost output and help Argentina reduce its dependence on imported energy, especially natural gas.
Last year, Mr. Galuccio held talks with Norway's Statoil ASA, Russia's government-controlled gas company, Gazprom, and Chevron Corp., among others.
In December, YPF inked a deal with a company linked to Argentina's Bulgheroni family to invest $1.5 billion together over the next two years to develop shale-gas and oil resources.
YPF also announced an agreement that same month with Chevron that could see the California-based company and YPF spend about $1 billion to drill 100 wells for unconventional energy in Argentina's resource-rich Neuquen Province.
However, a court-ordered embargo on the assets of Chevron's local subsidiary, stemming from a decades-old case involving environmental damage claims in Ecuador, has raised questions about Chevron's ability to invest in Argentina. Chevron has said it will use all legal means available to fight the embargo.
"Today, I can say the commitment exists and if we have to find an economic model different than what was originally planned, the commitment is there," Mr. Galuccio said, referring to the Chevron deal.
Taos Turner and Shane Romig contributed to this story.
Copyright (c) 2012 Dow Jones & Company, Inc.
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