Bloomberg News

Credit Suisse Sees YPF Outperforming on Guyana, Higher Crude

September 14, 2011

Sept. 14 (Bloomberg) -- YPF SA, Argentina’s largest oil company, is likely to benefit from rising domestic crude prices and from the potential discovery of deep-water oil in the Caribbean, Credit Suisse AG said.

The bank initiated coverage of Buenos Aires-based YPF’s American depositary receipts this week with an “outperform” rating and a 12-month price estimate of $50, Emerson Leite and Vinicius Canheu, analysts at Credit Suisse in Sao Paulo, wrote in a Sept. 12 note to clients. YPF rose 2.5 percent to $38.09 yesterday on the New York Composite Exchange.

YPF, which is 57.43 percent owned by Spain’s Repsol YPF SA, produces about 40 percent of Argentina’s oil and is the country’s biggest fuel retailer. Argentine oil prices lag behind international levels as the government caps exports at about $42 a barrel, less than half the $89.79 a barrel in international markets. Crude is sold on the domestic market at about $55.

“YPF is currently in a unique position of facing an upside risk to its realized fuel prices at a time when wider commodity prices have remained persistently high amidst volatile markets,” Leite and Canheu said. Argentine oil prices need to increase toward international levels, they said.

YPF also has the “possibility of a significant event if the Jaguar well in Guyana proves successful this October,” the analysts said. YPF holds a 30 percent stake in Jaguar, offshore Guyana. Jaguar is near French Guiana’s offshore Zaedyus well, where Tullow Oil Plc announced Sept. 9 the first oil discovery in the region, opening a new oil frontier in Latin America.

--Editors: Laura Price, Dale Crofts

To contact the reporter on this story: Rodrigo Orihuela in Buenos Aires at rorihuela@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net


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