...is pretty tough. The market rewards and punishes and i have been on both sides of this type of education

Quote Originally Posted by Firn View Post
I do this stuff with small notes and mental number crunching, however I made four key prediction about YPF which all were dead wrong:

1) I believed that Kirchner&Co had learned from the poor performance of their nationalized Aerolneas Argentinas. If not:

2) Price controls and the weak peso created their negative energy balance, by reducing the incentives to invest and making imports more expensive, not Repsol per se. If not:

3) I assumed that they would pay for the shares like they did with Aerolinas. If not:

4) At least it would be only roughly 25% of YPF gone. It never crossed my mind that they would just take the shares from Repsol, leaving the other shareholders unharmed.

So it pretty much went perfectly wrong and the safety margin has completely gone
Thanks for sharing your investment thesis, good learning/practice for how to develop investment them.

The Spanish company Repsol YPF SA (company website) is familiar to me via my travels and through their sponsorship of "Doctor" Valentino Rossi (while puttering around on my motorcycles i dream ) and I am aware that Repsol took over Argentina's YPF in 1999; so let's see if we can add some background to your thesis via a quick (free time is tight) internet drive-by?

Oil Overview

There are apparently eight oil refineries in Argentina with a capacity of 625,165 barrels per day. With today's FT's report of Brent at $119.83 USD, and wrongly assuming 100% operational output, that works out to potential daily sales of $74,913.521.95 USD before labor, material, equipment, overhead, and profit costs. Repsol-YPF owns three of these refineries (La Plata, Luja'n de Cuyo, and Plaza Huincul - startup date 1919) with the potential for 331,690 barrels per day and potential daily sales (not including costs) of $39,746.412.70 USD. 'Proved' Argentinian oil reserves are estimated at 2.5 billion barrels in size, while shale oil reserves are estimated at an additional 150 million barrels and there is a report of a discovery called Vaca Muerta, which may hold 927 million barrels. This information is of interest when attempting to forecast future YPF revenues due to oil. With the 100 day moving average currently at $116.40, and the 200 day moving average at $113.60, Javier Blas of the FT forecasts that between seasonal maintenance of refineries, price differences between crude oil grades, and futures contracts any falls in oil prices will be short lived.





  • Support for oil prices weakens – for now, By Javier Blas, Commodities Editor, April 20, 2012 10:29 am, Financial Times, www.ft.com

Natural Gas Overview

Argentina's substantial natural gas reserves are estimated at 13.4 trillion cubic feet (Tcf) and 774 Tcf of shale gas. YPF competes with Total Austral, CNOOC-affiliate Pan American Energy, Petrobras (Brazil), Pluspetrol (Argentina), Tecpetrol (Argentina), and Apache Energy (U.S.) for natural gas.


Political Risk Overview

Ms Fernandez' appears to be interested in achieving national self-sufficiency in oil and gas production, and it was claimed that Repsol YPF SA did not reinvest enough of its YPF profits to boost Argentinian production. By circumventing rule of law issues via nationalization she invites an international backlash...whose scope, breadth, and composition remains to be seen and which could potentially harm a weak nation still recovering from a financial meltdown in 2003.

The Expropriation Law will apparently be used to determine how to compensate Repsol for the loss of it's 51% stake in YPF.

  • Argentina risk: Alert - YPF's expropriation fuels investor concerns, April 18th 2012, Economist Intelligence Unit, www.eiu.com



Technical Overview

Repsol [ REP.MC (Madrid), REP.BA (Buenos Aires) ] stock data in Euro (and as of 27 April 2012) includes a 52 week high of 24.23, 52 week low of 13.92, April 27th 2012 close at 14.70, a tangible book value of 12.90, a 7.5% dividend paid on January 10th 2012, and a beta of 0.9876 as compared to the IBEX 35 Composite Index.

I usually download stock data via google and interrogate the heck out of it via excel...however, no joy with google (i can only find data for the ADR) and i am presently unaware of how to ask the FT interactive chart to reveal the 15 day, 50 day, 100 day, 200 day, and 252 day moving average for share price and volumes....hints would be appreciated.