YPF SA (YPF), Argentina’s largest oil company, will face mounting government pressure to boost spending on output expansion in exchange for support to charge more for its crude, Banco Itau (ITUB4) BBA SA said.
Ongoing price increases will be necessary to offset higher spending, Itau analysts including Ricardo Cavanagh and Paula Kovarsky wrote in a report dated yesterday.
“The government is likely to exert increased pressure for investment commitment in exchange for price improvements,” the Itau BBA analysts said. “YPF is already undertaking increased investments to sustain conventional production.”
President Cristina Fernandez de Kirchner said this week that lack of investment by oil companies including Buenos Aires- based YPF was to blame for the doubling of fuel imports in 2011 from a year earlier to $9.4 billion. The imports eroded a trade surplus that Argentina, blocked from international credit markets since a 2001 default, depends on to build central bank reserves.
Fernandez’s government is probing alleged fuel-price fixing by YPF, Petrobras Argentina SA (PESA) and other companies following a complaint from the country’s transport association. Late last year she ordered oil companies to repatriate future export revenue.
Oil in Argentina was 46 percent cheaper than Brent crude in the third quarter, with domestic fuel prices 30 percent below import levels, according to the report. Itau BBA maintained an “outperform” recommendation on YPF.
YPF declined to comment on the Itau BBA report. The company on Jan. 18 denied it colluded with other companies to fix gasoline prices.
American depositary receipts of YPF were little changed at $40.66 in New York at 10:20 a.m. The stock fell 19 percent in the 12 months through yesterday.
To contact the reporter on this story: Laura Price in Buenos Aires at lprice3@bloomberg.net
To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net
Source: Bloomberg