Ilan Brat – The Wall Street Journal/Dow Jones, 05/24/2012
MADRID (Dow Jones)–Repsol YPF SA (REP.MC) said Thursday that some of the areas it is exploring off the coast of Brazil contain more than more than a billion barrels of oil and gas, a development that highlights the potential of the operations there to drive Repsol’s growth.
The announcement comes as Repsol’s management has been trying to persuade investors that company’s future remains bright while assuaging concerns about some near-term challenges after Argentina nationalized 51% of Argentina’s YPF SA (YPF), the country’s leading oil-and-gas company, leaving Repsol with a 6.4% stake in early May.
In the wake of the expropriation, investors and analysts are questioning how Repsol will fund its dividend payout and capital expenditures and protect its investment-grade credit rating. While Repsol’s production-growth prospects remain above average for European oil companies, many of its projects, including those detailed Thursday, may not start producing large amounts of oil and gas–and generating substantial cash flow–for several years. The company’s management will have an opportunity to address the concerns at its strategy update planned for May 29.