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May 11, 2006 6:49 pm

Repsol considers spinning off Argentine unit

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Antonio Brufau, chairman of Repsol YPF, on Thursday said the Spanish oil group was considering spinning off its Argentine unit YPF in a public offering.

If there was “appetite” and “value” for the company, Mr Brufau said in a conference call with analysts, Repsol might sell a stake of between 15 and 20 per cent in YPF.

However, analysts suspect Mr Brufau of trying to insure Repsol against the adverse effects of a nationalisation wave sweeping across Latin America. Repsol’s shares have weakened since Evo Morales, the president of Bolivia, nationalised his country’s oil and gas industry on May 1.

If Argentina ever decided to nationalise its oil industry, a separate YPF listing would give Repsol an objective market price upon which to negotiate compensation claims, analysts said.

Repsol bought Yacimientos Petrolíferos Fiscales, a privately-owned Argentine oil group, for $15bn in cash in 1999 in a quest to transform itself into an oil major.

But Argentina’s financial meltdown three years later led most analysts to write off Repsol’s Argentine assets.

Now that the Argentine economy has stabilised and oil prices are at record highs, analysts suggested Mr Brufau might be seeking to establish a market value for Repsol’s assets in Argentina.

Repsol is Europe’s fifth largest oil company, with a market value of €27.2bn ($35bn).

Mr Brufau said Repsol had held no talks with Argentine authorities on a possible sale. Repsol is already listed on the Buenos Aires stock exchange.

In Bolivia, Repsol has about 18 per cent of its proven reserves and 11 per cent of production, and owns 50 per cent of Andina, a big gas operator. It has not yet been told under what conditions it will be allowed to continue operating in the country.

“I hope we can reach a good agreement [in Bolivia],” Mr Brufau said. “If not, we will go to court. We are trying to convince all the parties involved that the best scenario is one of co-operation.”

Mr Morales, in Vienna for a summit of Latin American and European Union leaders, on Thursday ruled out any compensation for oil companies. “If they have recovered their investment and have also booked some earnings, there is no need to indemnify them whatsoever,” Mr Morales said.

Repsol’s shares fell 1.2 per cent on Thursday in spite of reporting a 7.5 per cent increase in net profit to €844m.

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