Fitch Rates YPF S.A.'s 2018 and 2024 Notes' Reopening of up to USD750MM 'CCC'

martes 3 de febrero de 2015 14:47 GYT

(The following statement was released by the rating agency) NEW YORK, February 03 (Fitch) Fitch Ratings rates YPF S.A.'s (YPF) reopening of the company's 2018 and 2024 notes by up to USD750 million 'CCC'. The company's rated notes with maturity dates of December 2018 and April 2024 notes total, before the reopening, USD587 million and USD1 billion respectively. The 2024 notes have a 10-year maturity with amortizations in years eight (30%), nine (30%) and 10 (40%). The 2018 notes have a bullet maturity. The proceeds from the reopening will be used to fund fixed asset investments in Argentina and working capital requirements. The notes rank at least pari passu in priority of payment with all other YPF senior unsecured debt, and are rated the same as all senior unsecured obligations of YPF. KEY RATING DRIVERS YPF's ratings reflect its strong linkage with the credit quality of the Republic of Argentina (Fitch local and foreign currency Issuer Default Ratings of 'RD' and a country ceiling of 'CCC') and the company's relatively low reserve life. LINKAGE TO SOVEREIGN: YPF's ratings reflect the close linkage with the Republic of Argentina resulting from the company's ownership structure as well as recent government interventions. The Republic of Argentina controls the company through its 51% participation after it nationalized the company on April 2012. Following this action, the company's strategy and business decisions are governed by the Republic of Argentina. LOW HYDROCARBON RESERVE LIFE: The ratings consider the company's relatively weak operating metrics characterized by low reserve life and historically declining production levels. As of year-end 2013, YPF reported proved reserves of 1,083 million barrels of oil equivalent (boe) and average production of 493,400 boe per day. This translates into a below-optimal level reserve life of approximately six years. This factor could create significant operational challenges in the medium to long term. IMPROVING PRODUCTION: The company's average production in 2013 was up nearly 2% year-over-year, and this improving trend has continued in 2014. Production in the third quarter of 2014 averaged 573,000 boe per day, which is 16% higher than 2013 figures. Both crude oil and natural gas production have steadily grown on a quarterly basis helped in large part by the steady growth in tight gas and shale oil production. After only two years, the Loma Campana shale oil field is the second largest producing field in Argentina with gross production increasing from 7,900 boe/day in 1Q13 to 31,900 boe/day in 3Q'14. STRONG BUSINESS POSITION: YPF benefits from a strong business position supported by its vertically integrated operations and dominant market presence in the Argentine hydrocarbons' market. Fitch anticipates that YPF will continue to exercise an active role in domestic fuel and gas supply. In addition, Fitch expects the company to continue to solidify its market leadership in Argentina and also increase its proved reserves via small to medium-sized acquisitions such as the this year's purchase of Apache Argentina which added 135 million boe in proved reserves. This acquisition increased the company's proved reserves by 12%. ADEQUATE CREDIT PROTECTION METRICS: YPF has relatively solid credit protection metrics, characterized by moderate leverage and a manageable debt amortization schedule. Total cash and equivalents amounted to approximately USD1.9 billion as of Sept. 30, 2014, which covers the company's debt maturities for the next 18 months. As of the last 12 months (LTM) Sept. 30, 2014 period, total financial leverage, as measured by total debt-to-EBITDA, reached 1.1x, which is considered low for the assigned rating. As of year-end 2013, YPF's total debt-to-total proved reserves ratio was average at USD4.5 per boe. Total debt as of third quarter of 2014 amounted to approximately USD5.8 billion, of which approximately USD1.5 billion was short-term. EBITDA for LTM September 2014 was approximately USD5.1 billion, which is up 25% on a year-on-year basis. During recent years, the company's leverage has been moderately increasing, mostly as a result of increases in debt. Fitch expects leverage to increase above 1.5x in the near to medium term given YPF's ambitious 2013-2017 USD28-USD30 billion capex program. Incorporating the maximum bond reopening of USD750 million, the company's LTM September 2014 leverage ratio would rise to 1.3x on a pro forma basis. RATING SENSITIVITIES YPF's ratings could be negatively affected by a combination of the following: a downgrade of the Republic of Argentina's ratings; a significant deterioration of credit metrics; and/or the adoption of adverse public policies that can affect the company's business performance in any of its business segments. A positive rating action in the short to medium term is considered unlikely given the linkage with sovereign credit quality, and Argentina's current sovereign restricted default rating. Contact: Primary Analyst Xavier Olave Associate Director +1-212-612-7895 Fitch Ratings, Inc. 33 Whitehall St. New York, NY 10004 Secondary Analyst Paula Garcia Director +562-2-4993316 Committee Chairperson Daniel Kastholm Managing Director +1-312-368-2070 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: Additional information is available at ''. Applicable Criteria and Related Research: --'Corporate Rating Methodology' (May 28, 2014). 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