OIL&GAS
THE DOUBTS THAT PERSIST IN THE ENERGY SECTOR DUE TO THE AGREEMENT WITH THE IMF
The reaction of the market. The official announcement of an agreement with the IMF with great fanfare failed to awaken the euphoria of the energy sector, which maintains a cautious position and waits for the fine print of the document to draw up an analysis of the impact on the industry.
It is that, as the Fund's statement says, what was announced this morning represents only an "understanding" on which work will have to be done to reach the signing of the final memorandum in the coming weeks.
As this medium explained, the entire industry is waiting for a successful closing of negotiations that clears Argentina's financial commitments and allows a return to international markets. Therefore, the fact of avoiding a default is not minor and was moderately celebrated in the financial markets.
“The market today started with a little more optimism considering that the terms for Argentina to face a severe adjustment would be eased. Oil stocks rose on the possibility that long-term investments could be secured in the future to reinforce the missing infrastructure in Vaca Muerta.
But the agreement is not yet closed, that is why the market does not fly”, explains financial analyst Francisco Uriburu.
Specifically, the shares of the energy companies listed on Wall Street began the day with a jump of up to 10% to later stabilize in the order of 5%, which reflects a speculative attitude to take profits and escape from Argentine assets, more than an outlook of confidence towards the future.
In turn, with papers that operate more than 60% below the values they had at the end of 2019 measured in dollars -where the financial scenario was not very different from the current one- the expectation was of a much greater jump when knowing a positive news like this in relation to the country's main macroeconomic stumbling block.
Beyond the uncertainty that means that the agreement is not yet closed, nor approved by the National Congress or by the IMF Board -with the strong internal politics that exist in each of these places that could make it difficult to sign it- there other highly relevant issues for the sector that require more clarity.
On the one hand, if the reduction of energy costs highlighted by the IMF will have a specific goal like the fiscal deficit or if they will give the government some freedom to set them. In the same sense, with or without a goal, it will be important to know what the official measures will be to achieve this adjustment, in a very adverse international scenario due to the rise in hydrocarbon prices.
On the other hand, Guzmán affirmed that “measures are aimed at strengthening those sectors that can generate foreign currency”, which logically includes Oil & Gas, although the government continues to show no guarantees of modifying regulations to allow firm exports and the law that tried to improve this situation was momentarily boxed.
Along these lines, it will also be key to confirm the start of infrastructure expansion works such as the gas pipeline system, oil pipelines and the high-voltage network that, otherwise, will operate as bottlenecks that will not allow external energy sales to increase. .
Finally, another of the main concerns of the sector goes through the path of fuel prices. Since May 2021, the pumps have been frozen when, in parallel, the world suffered one of the highest short-term oil price increases in living memory with a barrel trading at $90.
Guzmán's statement at this Friday's press conference that "price agreements are going to play a fundamental role in the anti-inflationary scheme" shows that it will be difficult to see a substantial recomposition of fuels as requested by the oil companies. The problem is that, the greater the gap between the local and international prices, the less interest Vaca Muerta will arouse for foreign investors and it will be difficult to increase production only with firms from the local market.
“The credit that YPF took is an important milestone for the Argentine oil sector. Considering the country risk that we have and the high world inflation, it is a reasonable cost that could take advantage of, but it is still a minor amount for Vaca Muerta”, added Uriburu.
Strictly speaking, it is about 300 million dollars when only YPF has an investment guideline of 2,700 million for this year and according to analysts in the area, the entire basin needs a floor of 5,000 million annually.