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YPF Plans to Invest $2.7B in 2021 for Development Purpose

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Zacks Equity Research
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YPF Sociedad Anonima YPF announced that it will maintain its previously disclosed $2.7-billion investment fund for 2021 as part of its business recovery plans.

Notably, the move implies 73% year-over-year investment growth and places the Argentina-based oil giant as a leading investment firm in the country. YPF faced a significant drop in economic activities last year due to the fall in oil prices and a collapse in the fuel demand caused by the pandemic.

About 80% of 2021 investments are planned to increase activities and the production of oil and gas in the company-operated fields. YRF is expected to invest $1.3 billion in the drilling of more than 180 exploratory wells in Vaca Muerta, thereby, enabling the company to maintain its leading position in the formation.

Further, YRF will develop a long-term plan in the conventional oil reserve, with $800 million of investment focused on secondary and tertiary recovery. In tertiary, it will invest $120 million and is expected to drill 30 new injection wells and include 10 new polymer plants to the 10 existing plants.

Notably, Vaca Muerta is one of the largest shale formations and the fourth-largest unconventional oil reserve in the world. The company, which has taken the lead in Vaca Muerta, reorganized its debt last month to limit financial harm and improve its business. However, the debt restructuring failed to make available funds amid pressure from the central bank on access to foreign currency. Hence, to make the activity-recovery plan feasible, YPF will impose strict discipline to control expenses for enhancing the effectiveness of operational activities.

In 2021, the company plans to invest $800 million in conventional hydrocarbons and $600 million in gas to generate the energy the country needs for its growth.

Company Profile & Price Performance

Headquartered in Argentina, YPF is a vertically integrated energy company, engaged in oil and gas exploration and production, and the transportation, refining, and marketing of gas and petroleum products.

The company’s shares have underperformed the industry in the past three months. Its stock has declined 19.5% against the industry’s 23.9% growth.

Zacks Rank & Stocks to Consider

YPF currently carries a Zack Rank #3 (Hold).

Some better-ranked players in the energy space are Callon Petroleum Company CPE and Global Partners LP (GLP, each presently sporting a Zacks Rank #1 (Strong Buy), and Valero Energy Corporation VLO, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Callon’s earnings for 2021 are expected to rise 38.8% year over year.

Global Partners’ earnings for 2021 are expected to increase 13.1% year over year.

Valero Energy’s earnings for 2021 are expected to surge 583% year over year.

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