YPF Plans Scrip Dividend as Politics Heats Up

YPF has approved a ARS5.8bn ($1.33bn) capitalization in attempt to appease both shareholders government, though analysts and observers take a less positive view of the company’s and industry’s outlook under President Kirchner. If approved by shareholders next month, the oil producer’s plan would offer shareholders the option of receiving stock, or a scrip dividend, which would be 10% higher than the 2010 dividend. As proposed, the capitalization would let the company keep a rich dividend chest that could in the future be used to finance additional investment in the sector, while also giving shareholders a stake in that cash in the form of shares they can later turn around and freely sell in the market. With the Argentine government pushing for more investment in oil exploration and production, the government’s representative on the YPF board voted against the proposal. Government officials have recently made conflicting statements regarding the possibility of nationalizing YPF should the company fail to toe the state line. In a recent report, Barclays reckons the government may yet move to nationalize the company. “We think that as long as the government is able to sell bonds through state agencies to get the necessary amount of dollars to import energy, the energy trade deficit will find financing and the effect on growth will be limited. But the administration may be looking for a more drastic solution, including the possible nationalization of YPF,” the shop says in a report. Over the past 6 months, YPF’s ADRs have lost 20.44% compared to a 23.30% rise of the S&P 500 index and the progression of political events does not look encouraging. Already the Kirchner administration has eliminated 2 tax breaks for the energy industry that according to Moody’s amounted to $404m in annual tax savings for the companies. Moreover, late last year, the government also forced all energy companies to repatriate 100% of their foreign exchange proceeds, instead of keeping 70% as pr