BUENOS AIRES: YPF SA, Argentina’s largest company, said first-quarter profit fell 26 percent after the government cut gasoline prices amid a global energy slump.
Net income slid in the quarter to 2.13 billion pesos ($238 million), or 5.42 pesos a share, from 2.88 billion pesos, or 7.34 pesos, a year earlier, the Buenos Aires-based oil producer said in a statement to Argentina’s regulator. Excluding one-time items, per-share profit missed the 5.56-peso average forecast of five analysts surveyed by Bloomberg.
While other oil companies including BP Plc and Royal Dutch Shell Plc have announced spending cuts of more than $40 billion, Argentina’s state-run producer plans to keep its $6 billion annual capital budget target intact and maintain its workforce. The state-controlled company, which was nationalized in 2012, is mainly investing in the Vaca Muerta shale formation in southern Argentina.
In December, with Brent crude prices down about 50 percent from a June high, the Argentine government set the fourth-quarter price of Medanito light oil at $83.90 a barrel and Escalante heavy at $74. The domestic price has protected YPF and other producers from the huge declines that prompted cost cutting by major oil companies elsewhere.
At the same time, the government ordered companies to cut prices at the pump by 5 percent. YPF has about 60 percent of the retail gasoline market.
While the drop in oil prices helped the company reduce crude costs for its refineries, that was offset by the government-mandated gasoline cut, Chief Financial Officer Daniel Gonzalez said on a conference call Friday. “The reality is the price went down and we don’t know at what pace we will be allowed to increase our prices.”
Bond Sales
To fund spending, YPF increased its debt by 15.5 percent including a $500 million sale of bonds in February. The company sold another $1.5 billion of bonds in the international market last month. The average cost of its debt in dollars was 7.1 percent in the quarter and 23 percent in pesos.
Crude oil output rose 2.3 percent while natural gas production jumped 18 percent in the quarter, the company said. Sales rose 13 percent to 34.7 billion pesos as costs increased by 13 percent from the same period in 2014.
In the downstream sector, which includes refining and marketing, sales increased 7.8 percent to 31.9 billion pesos, trailing the government’s 16.5 percent annual inflation rate. Private analysts estimate prices actually rose about 25 percent.
“Petrochemicals product sales reported less income in the local market due to a decrease in volume and cheaper prices in pesos,” YPF said.
The earnings report was released yesterday after the close of regular trading in Argentina. YPF’s American depositary receipts fell 3 cents to $30.25 at 12:09 p.m. in New York. The ADRs, equivalent to one ordinary share, have gained 14 percent year to date.
