Argentina, Repsol struggle to bridge gap over YPF compensation

Thu May 23, 2013 8:49am EDT
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By Tracy Rucinski and Karina Grazina

MADRID/BUENOS AIRES (Reuters) - A year after Argentina seized the local business of Spanish oil firm Repsol (REP.MC: Quote), there seems little prospect of a quick deal on compensation despite signs that both sides would rather avoid a costly, drawn-out legal battle.

The Latin American country's lack of funds and its limits on the control private firms have over their investments - which could deter Repsol from accepting other assets in any settlement - pose major obstacles to a deal, according to analysts.

Argentine President Cristina Fernandez expropriated Repsol's majority stake in YPF YPFD.BA last May, accusing the firm of investing too little. Repsol denied the charges and filed lawsuits against the country for a loss valued at $10.5 billion.

A year later the Argentine government, keen to rebuild relations with foreign investors and attract funds to develop a vast shale field, has held talks with a major shareholder in Repsol over a possible deal to side-step a long legal battle, a source familiar with the matter told Reuters.

Repsol has officially denied any involvement in talks with Argentina but says it will keep all avenues open for settlement.

The Spanish government, eager to protect the investments of other companies like Telefonica (TEF.MC: Quote) in Argentina, has also said it would listen to options to settle the YPF dispute.

Repsol's chief financial officer, Miguel Martinez, said earlier this month it would be open to a mixed package including cash, cash equivalents or liquid assets.

One asset option tipped by analysts is a stake in YPF's valuable Vaca Muerta, or "dead cow", shale field.   Continued...

A sign with the YPF Gas logo is seen outside a gas distributor in Moreno, Buenos Aires province, April 19, 2012. REUTERS/Marcos Brindicci