Repsol Upside Is Seen After YPF Seizure
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Spanish oil heavyweight Repsol YPF SA has lost nearly one-fifth of its valuation after Argentina's move to seize control of YPF SA sliced off a huge chunk of the company's production and earnings. Yet, two weeks after the Argentine bombshell, some investors and analysts are starting to devise a potential upside scenario for the battered Spanish company, The Wall Street Journal reported. Without YPF, Repsol will be a smaller company with a promising set of oil and natural-gas exploration and production projects in frontier areas such as off the coast of Brazil and Angola, some investors say. The new Repsol also won't see its profits limited by the Argentine government, which caps energy prices. There is no doubt that the Argentine move will probably cost Repsol billions of dollars, or that the company faces tough questions in light of the scale of YPF to its profile. Company officials have promised a new strategic plan by late May to respond to doubts about its credit rating and other core questions. Yet some investors believe Repsol shares have bottomed out. The thinking is that Repsol could do well if it can protect its credit rating and find the cash to finance developments. Repsol shares are now "attractively valued," Firmino Morgado, a fund manager with Fidelity Worldwide Investment, the company's 11th largest shareholder with a 0.6% stake, said in an emailed statement. Mr. Morgado plans to hold his Repsol shares, and said the company "is well positioned for growth given its exposure to key areas," including off the coasts of Brazil and West Africa and in the Gulf of Mexico. Read more. (Subscription required.)