Argentina's YPF to fund most of its investment needs

BUENOS AIRES Thu Aug 30, 2012 2:23pm EDT

A man waves a flag with the YPF logo in front of the Argentine Congress in Buenos Aires April 25, 2012. REUTERS/Marcos Brindicci

A man waves a flag with the YPF logo in front of the Argentine Congress in Buenos Aires April 25, 2012.

Credit: Reuters/Marcos Brindicci

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BUENOS AIRES (Reuters) - Argentina's state-controlled energy company YPF (YPFD.BA)(YPF.N) said on Thursday it would rely mainly on its cash flow to fund the $37.2 billion in investments needed to boost oil and natural gas output by about a third by late 2017.

President Cristina Fernandez seized control of YPF from Repsol (REP.MC) in April, accusing the Spanish oil major of investing too little and making the country 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 was unable to find a partner to jointly develop a 250-square kilometer 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.

Galuccio said YPF's finances were solid.

"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 as he presented the strategic plan.

Of the $32.6 billion that YPF aims to fund in investment, Galuccio said 80 percent would come from cash flow and 20 percent from loans or debt sales.

The company said on Thursday it is setting its dividend payout ratio at 5 percent. Before the takeover, YPF had one of the most generous dividend policies in the industry, with a ratio of about 75 percent.

YPF aims to boost oil and natural gas production by 32 percent by 2017, Thursday's presentation showed.

Hydrocarbons output has been in decline for years in Latin America's third largest economy 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, fell 15 percent and 31 percent, respectively, between 2007 and 2010.

(Additional reporting by Juliana Castilla; Writing by Helen Popper; editing by Carol Bishopric)

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