Bloomberg News

Gas Natural Climbs After $1.9 Billion Sonatrach Settlement

June 15, 2011

(Adds pipeline location, Algerian oil and gas output from sixth paragraph.)

June 15 (Bloomberg) -- Gas Natural SDG SA rose the most in five months in Madrid after agreeing to pay Algeria’s Sonatrach $1.9 billion to settle a dispute while saying the Algiers-based energy company may take a stake in its Spanish distributor.

The stock climbed as much as 5.2 percent and traded at 13.75 euros, up 3.2 percent, as of 4:55 p.m. local time. Gas Natural previously said it made provisions to cover the dispute.

“The agreement with Sonatrach removes a key uncertainty and improves earnings visibility,” Alberto Gandolfi, an analyst at UBS, wrote today in a note to investors. Gandolfi raised his rating to “buy” from “neutral” and his 2011 earnings per share estimate to 1.29 euros from 1.20 euros, matching the 1.29- euro average forecast of 19 analysts in a Bloomberg survey.

The Barcelona-based company, Spain’s largest natural gas provider, needed to wind up the dispute with the supplier for about one-third of its gas. Today’s share gain extended Gas Natural’s year-to-date increase to 20 percent, the best performance on the 29-member Bloomberg Gas Index, which has lost 3.1 percent in the period.

The $1.9 billion payout “will not have an impact” on Gas Natural’s results, Spain’s largest gas supplier said late yesterday in a regulatory filing. The companies analyzed “the possible acquisition by Sonatrach of a minority stake in Gas Natural” and the “possible participation” of the the Barcelona-based company in Sonatrach projects.

The settlement was provoked by an arbitration court ruling in August that recognized the right of state-controlled Sonatrach to boost the price of gas supplied to Spain since 2007 through the Maghreb Europe pipeline, which crosses Morocco and extends into Spain and Portugal.

Algeria, a member of the Organization of Petroleum Exporting Countries, has a production capacity of 1.4 million barrels a day of oil and exports about 60 billion cubic meters a year of gas.

--Editors: Alex Devine, Stephen Cunningham

To contact the reporter on this story: Todd White in Madrid at twhite2@bloomberg.net

To contact the editors responsible for this story: Craig Stirling at cstirling1@bloomberg.net; Reed Landberg at landberg@bloomberg.net


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