UPDATE 2-Argentina's YPF says can fund most investment needs
* State-controlled company details $37.2 bln investment plan
* Says will fund $32.6 bln with cash flow, some debt
* CEO says in "advanced conversations" with Chevron
* Slashes dividend ratio to focus on output boost
By Alejandro Lifschitz and Karina Grazina
BUENOS AIRES, Aug 30 (Reuters) - Argentine energy company YPF said on Thursday it would use its own cash flow to fund most of the $37.2 billion needed to boost oil and natural gas output by about a third over the next five years.
President Cristina Fernandez seized control of YPF from Repsol in April, accusing the Spanish oil major of investing too little and making Argentina increasingly reliant on pricey imports.
Chief Executive Miguel Galuccio, a former executive at global oilfield services company Schlumberger Ltd, said YPF's 2013-17 investment plan could be reduced to $24.7 billion if it failed to find a partner to develop jointly a 250-square-kilometer (97-square-mile) shale field.
Argentina sits on huge resources of shale natural gas and oil, but large amounts of capital would be needed to bring them into production and the country remains virtually shut out of global credit markets a decade after staging the biggest sovereign debt default in history.
"We've got 80 percent of the (investment) program covered with operating cash flow, not earnings, and the remaining 20 percent coming from debt," Galuccio said. The total contributed by YPF would be $32.6 billion.
YPF's net cash flow was 12.8 billion pesos ($2.8 billion) last year, while net profit came to 5.3 billion pesos.
Soon before Fernandez announced the YPF takeover, Repsol said it would cost $25 billion a year to develop the world-class Vaca Muerta shale find that has drawn interest from international oil companies despite jitters about the investment climate in Latin America's No. 3 economy.
Galuccio said the company was in "advanced conversations" with U.S. energy firm Chevron Corp and that several Argentine-based companies, including Bridas Corp, were interested in investing in YPF.
"A lot has been said about the company's financial stability, and I want to send a message to markets here in Argentina and abroad: the company's financial stability is guaranteed," he said.
"We signed a memorandum of understanding yesterday with a local partner that is willing to invest $500 million in a YPF project ... We're in advanced conversations with Chevron."
Industry analysts say YPF's limited financing options mean its chances of developing Vaca Muerta hinge on its success in luring deep-pocketed partners with the technical know-how to exploit shale resources.
YPF aims to boost oil and natural gas production by 32 percent by the end of 2017, reversing years of declining hydrocarbons output in Argentina at a time of strong demand.
Crude production fell 5.9 percent and natural gas output slipped 3.4 percent last year as power demand rose 5.1 percent, according to data from the Argentine Institute of Petroleum and Gas.
YPF's proven reserves of crude and natural gas, which do not include the new shale finds, declined 15 percent and 31 percent, respectively, between 2007 and 2010.
Since it was put under state control in May, YPF has said it will slash dividend payments in order to boost investment in production.
The company also wants to revive refining activity, aiming for an increase in gasoline and diesel output of 37 percent by end-2017.
Galuccio said on Thursday the dividend payout ratio would be set at 5 percent, with a debt-to-EBITDA ratio of below 1.5.
Before the takeover, YPF had one of the most generous dividend policies in the industry, with a ratio of about 75 percent to 80 percent.
Fernandez's decision to expropriate a controlling stake in YPF riled Repsol and the Spanish government but was popular with many Argentines.
The opposition Radical party presented a bill to Congress this week to nationalize the 49 percent stake that remains in private investors' hands, but congressional sources said the proposal was unlikely to garner much support.
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