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Repsol Rejects $5 Bln Compensation Offer From Argentina For YPF Seizure

6/26/2013 10:24 PM ET

Spanish oil giant Repsol, S.A. (REPYY) on Wednesday rejected a $5 billion compensation offer from the Argentine government for the expropriation of Repsol's stake in Argentine oil company YPF SA (YPF: Quote).

In a statement, Repsol said that its board of directors unanimously rejected the compensation offer it received for the expropriation of YPF. Repsol noted that the compensation offer of $5 billion did not satisfy the losses suffered by the company.

The Argentine government expropriated 51 percent of YPF's stock from Repsol in May 2012, ignoring threats of strong retaliation by the Spanish government as well as the European Union.

The government's move to re-nationalize YPF, which provides about a third of the country's oil and a quarter of its gas requirements, came a year after YPF announced the discovery of large swathes of shale oil and gas fields.

While announcing her government's decision to nationalize YPF in mid-April, President Cristina Fernandez de Kirchner had blamed the doubling of Argentina's oil imports in the prior year on the failure of companies like Repsol to make adequate investments in oil and gas production. She insisted that reclaiming control of Argentina's largest oil company was of vital national interest.

Repsol later filed a legal complaint against Argentina at the World Bank's arbitration body in Washington over the nationalization of YPF. Repsol was reportedly seeking $10.5 billion from Argentina over what it described as "unlawful and discriminatory" seizure of its controlling stake in YPF.

On Wednesday, Repsol noted that the Argentine government's compensation offer to the company involved giving it a stake in a joint venture made up of assets representing 6.4 percent of the total stake held by YPF in Argentina's Vaca Muerta shale assets.

In the joint venture that will be controlled by YPF, Repsol would own a 47 percent stake and Mexican state-owned company Petróleos Mexicanos or Pemex would own 2 percent. Pemex currently owns a 9.37 percent stake in Repsol.

The Argentinean Government valued its offer at $5 billion distributed in stakes of assets in Vaca Muerta worth $3.5 billion and capital of $1.5 billion to be necessarily invested in the development of the joint venture.

Repsol said, "Following an exhaustive technical and economic internal analysis, supported by external specialist reports, the Board of Directors considered unsatisfactory for the interests of the company the offer formulated at a nominal value of $5 billion, as it does not satisfy the losses suffered by Repsol.."

However, the company added that it was pleased to note the interest of the Argentinean government in a negotiated solution. The company further said it hoped that the Argentinean government would maintain an open attitude to dialogue to reach a deal negotiated through the appropriate corporate channels, and which represents "a fair compensation and the end of the claims surrounding the expropriation".

REPYY closed Wednesday's trading at $21.10, up $0.33 or 1.59 percent on a volume of 21,846 shares. YPF closed trading at $14.50, up $0.36 or 2.55 percent on a volume of 945,262 shares.

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by RTT Staff Writer

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