Repsol Rejects YPF Compensation Offer From Argentina

MADRID - The board of Spanish oil firm Repsol SA unanimously rejected Wednesday a $5 billion proposal from Argentina to compensate it for last year's expropriation of most of Repsol's stake in YPF SA, saying the offer was "unsatisfactory."

The proposal would have given Repsol 47% ownership in a new company with drilling rights to 6.4% of Argentina's giant shale-gas field Vaca Muerta and $1.5 billion in cash and bonds that can only be invested in the project. The Argentine government valued this offer at $5 billion, said Repsol. However, the company added that this valuation "is constructed on overvalued assets far from market values seen in recent transactions."

In exchange for such a deal, Repsol would have had to drop a $10.5 billion legal claim against the Argentine government.

Repsol said it would welcome engaging in further negotiations with Argentina. It said the board hopes that the Argentine government maintains "an open attitude to dialogue... negotiated through the appropriate corporate channels, with the necessary serenity and balance and which represents a fair compensation and the end of the claims surrounding the expropriation."

The rejected proposal was brokered by one of Repsol's largest shareholders, Petroleos Mexicanos, or Pemex, in lieu of direct talks between Repsol and Argentina. The Mexican state-owned oil giant holds a 9.37% stake in Repsol.

Repsol has long said that it wants a negotiated settlement to the dispute but that Argentina has rejected several attempts to start discussions.

Pemex became involved following a failed attempt by Repsol's largest shareholder, Caixabank SA, to reach a compensation deal with Argentina.

Argentina last year passed a law which expropriated of 51% of YPF, the country's leading oil-and-gas company, leaving Repsol with 6.4%.

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

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