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Argentina’s Repsol Raid: Analysts Slash Expectations

Argentine President Cristina Fernandez de Kirchner holds a plaque before delivering a speech during a ceremony to mark the 30th Anniversary of the 1982 South Atlantic war between Argentina and the Britain over the Falkland Islands (Malvinas).
Juan Mabromata | AFP | Getty Images
Argentine President Cristina Fernandez de Kirchner holds a plaque before delivering a speech during a ceremony to mark the 30th Anniversary of the 1982 South Atlantic war between Argentina and the Britain over the Falkland Islands (Malvinas).

The share price of Spanish energy company Repsol plunged in early trading Tuesday, after the news that Argentina’s government will seize control of Repsol-backed energy company YPF.

Analysts covering the stock moved quickly to slash their recommendations.

Deutsche Bank and Jefferies cut Repsol to “hold” from “buy,” while Citigroup maintained its “buy” rating but slashed its price target to 20.50 euros ($26.95) from 25.50 euros ($33.52) and Bank of America Merrill Lynch moved its price target down to 23.80 euros ($31.28) from 27 euros ($35.49).

Investec cut the energy company to “sell” from “buy,” and said there was now a worst-case scenario of zero value for Repsol’s 57.4 percent stake in YPF.

Repsol’s share price has already fallen by around 26 percent this year as the Argentina threat loomed, but the announcement that the government would move to nationalize YPF has sent it down even further. YPF’s market value has also plunged since the dispute began to look more serious.

Analysts at Investec said that “some of the bad news is in the price” for Repsol already, but added: “At a minimum, Repsol is now set to lose control of YPF and, of course, any compensation seems set to be at current depressed prices.”

They said that the complete removal of YPF from Repsol’s earnings would take close to 10 euros ($13.14) off the share price.

Miners were down across the board in London trading, as the specter of resource nationalism was raised by Argentina’s actions, but reversed this trend later in the day.

Additional News: Incensed Spain Threatens Argentina After YPF Seizure

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