Three letters describe the ordeal that Repsol is experiencing in 2012: YPF. This is Repsol's Argentine subsidiary, and the Argentine government is threatening to nationalize it. The latest event in this conflict to occurred last week when YPF, owned by the Eskenazi family, announced that "the company will attempt legal recourse for guaranteeing their rights are defended" after the government revoked their licenses to mine hydrocarbons from the provinces of Salta and Mendoza. Activity is restricted to Neuquén, Chabut and Santa Cruz.
Drilling in Salta and Nequén would amount to 3% of YPF's total production. "The markets are discounting the piece of news almost entirely, but the stock's value has continued to drop since the beginning of 2012, and that is an exaggeration when taking into account the kind of expropriations we have seen until now," said Jorge Cruz from Toro Capital. YPF stock has fallen between 23.73 and 18.26 euros per share.
The question now is whether this blue chip stock has already been discounted for a worst case scenario. Analyst shops say that YPF's price should be between 5 and 6 euros, although some put it slightly higher. Bank of America, for example, believes it is worth 8.8 euros per share.
Sabadell is even more strict. In its valuation of YPF, it figures that the natural gas deposits in the Vaca Muerta region of Argentina, which is Repsol's biggest discovery and the project with the most potential for development and exploration for YPF and by extension Repsol, is worth 2.71 euros per share. But Repsol believes they are worth 27.21 euros per share.
