State energy company will sell five-year notes today to compensate for low oil prices
State energy company YPF will seek to raise up to US$1 billion today through the sale of a new five-year dollar denominated bond, which will be issued under New York legislation and will pay an interest rate close to nine percent.
The oil company, in need of cash amid a political controversy, has come under pressure during the recent drop in crude prices and is trying a new shorter-dated tender in order to reduce the cost of funding. The bond will be placed with JP Morgan and sold to local and foreign investors, with Credit Suisse Securities, JP Morgan Securities and HSBC Securities already confirmed as initial buyers.
The issuance of the bond was announced by the company through a letter sent to the CNV securities regulator yesterday. The public bid will run from 10am to 2pm, YPF said, and interest will be paid every six months.
YPF’s 2024s, which have a seven-year average lifespan, were available at a yield of 9.15 percent yesterday, down from a recent high of 10.44 percent on January 19, while its 2025s were yielding around 9.12 percent.
Since the announcement of the national government’s agreement with holdout creditors last month, a deal currently under debate in Congress, Argentina’s borrowers are weighing when best to issue bonds amid expectations of a supply surge this year. The government moved closer to an expected US$11.68-billion bond sale to pay litigant investors on Wednesday when it won the Lower House’s approval for the debt agreement.
YPF’s output and profits have recovered since the nationalization in 2012, but are now suffering again due to the massive plunge in global energy prices. The price of a barrel of oil has fallen from above US$100 each to around US$30 each since 2014.
The company reported a sharp swing into the red in the fourth quarter of 2015, posting a net loss of 1.70 billion pesos (US$131 million). Full-year profits almost halved on the previous year to 4.58 billion pesos. Oil output at YPF rose 2.1 percent in 2015 while gas production climbed 4.1 percent. Overall, production grew by three percent.
In a clear acknowledgement that the global downturn was hurting the exploration, the company said two weeks ago that it plans to cut capital expenditure by at least 20-25 percent this year to mitigate the impact of the global oil price rout.
Miguel Ángel Gutiérrez looks set to become the new president of YPF following the resignation of the current head of the company Miguel Galuccio.
Gutiérrez, who formerly headed telecommunications giant Telefónica and has 25 years experience in global financial circles, will be proposed as the Let’s Change administration’s pick at a key shareholders meeting next month.
The company is also in the spotlight for resisting judicial orders that it publish its “secret” deals with US major Chevron to drill in the shale oil-rich region of Vaca Muerta. It will appeal Judge Cristina Carrión de Lorenzo’s decision to impose fines on YPF starting next week if the firm does not comply with the order in five days’ time.
Date: March 18, 2016