YPF Quarterly Profit Doubles on Higher Production

Source: Bloomberg 11/6/2014, Location: South America

YPF SA said third-quarter profit more than doubled on higher production and sales as its fuel price increases beat inflation.

Net income rose to 3.2 billion pesos ($376 million), or 8.19 pesos a share, from 1.4 billion pesos, or 3.6 pesos, a year earlier, Buenos Aires-based YPF said in an Argentine regulatory statement. That beat the 6.13 peso per share profit, excluding some items, of four estimates compiled by Bloomberg.

More than two years after President Cristina Fernandez de Kirchner’s government expropriated YPF from Repsol SA, the producer increased gas output by 26 percent and crude by 5 percent in the quarter. The increase was triggered by production from Vaca Muerta, a Connecticut-sized formation in southern Argentina considered the world’s second-largest shale gas deposit and fourth-largest shale oil field. Chevron Corp. and Dow Chemical Co. are among YPF’s shale development partners.

While controlled by Madrid-based Repsol, the company’s output slid at an average 6 percent rate for almost a decade. Argentina expropriated YPF in April 2012 to stem fuel imports that doubled to $9.4 billion in 2011 because of the decline.

Government controlled-YPF has raised fuel prices by 42 percent this year, allowing the company to beat inflation and devaluation. Consumer prices have risen an estimated 39.5 percent in the past year, according to Buenos Aires-based research firm Elypsis. Sales at gas stations increased 62 percent in the quarter, YPF said.

Generating Cash

The company is also proving to be resilient to the country’s second default in 13 years after Argentina missed a July 30 interest payment of $539 million. YPF has been able to generate enough cash to finance operations without having to go to the international market to raise funds.

The company’s cash flow increased 95 percent compared with the same period a year ago to 18.2 billion pesos. The average cost of peso debt in the quarter was 25.1 percent and 6.7 percent for dollar debt. YPF’s board approved selling as much as $638 million of bonds, the company said in a separate statement.

YPF’s American depositary receipts gained 0.7 percent to close at $33.58 in New York yesterday. The ADRs have increased 57 percent in the past year and 156 percent since the company was seized from Repsol.

YPF Chief Financial Officer Daniel Gonzalez is scheduled to speak on an earnings conference call with investors starting at 8:30 a.m. New York time. The Buenos Aires market will be closed for a bank holiday today.


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