Fitch Views YPF's Acquisition of Apache Argentina as Neutral

NEW YORK--()--Fitch Ratings expects YPF S.A.'s (YPF) intended acquisition of Apache Argentina to be credit neutral. The acquisition is believed to nominally increase the company's leverage but more importantly it allows YPF to increase its hydrocarbon reserves now becoming the largest producer of natural gas in Argentina.

Fitch currently rates YPF's foreign and local currency Issuer Default Ratings (IDRs) at 'B-' with a Negative Outlook. In addition, Fitch rates YPF's International senior unsecured notes at 'B-/RR4'.

On Feb. 12, 2014, YPF announced an agreement to acquire 100% of Apache Corporation's (Fitch L-T IDR rating 'BBB+') operations in Argentina for US$800 million. Subsequent to the transaction, YPF will sell some Vaca Muerta acreage to Pluspetrol for US$217 million, making the net transaction value total US$583 million. This is an all cash transaction, which will be paid via a US$150 million two-year credit facility with the balance to be paid with cash on hand (YPF had US$1.1 billion of cash on hand as of 3Q'13).

As a result of the acquisition, YPF's pro forma total debt to EBITDA ratio would remain essentially unchanged at 1.2x. Because of cash usage, the company's net debt to EBITDA ratio would increase nominally from 0.9x to 1x. YPF's ratings reflect relatively solid credit protection metrics, characterized by moderate leverage and a manageable debt amortization schedule, factors which remain unchanged after the acquisition.

YPF's credit ratings consider the company's relatively weak operating metrics characterized by low reserve life and historically declining production levels. Via the acquisition, the company will be increasing its reserves from 979 million barrels of oil equivalent (boe) to 1,114 million (14% increase). Production will increase from 497,000 boe per day to 543,000 (9% increase-in the natural gas segment this acquisition will lead to a 15% increase in production).

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 5, 2013).

Applicable Criteria and Related Research:

Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715139

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Contacts

Fitch Ratings
Primary Analyst
Xavier Olave, +1-212-612-7895
Associate Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Paula Garcia, +562-2-4993316
Director
or
Committee Chairperson
Daniel Kastholm, CFA, +1-312-368-2070
Managing Director
or
Media Relations
Elizabeth Fogerty, +1-212-908 0526 (New York)
elizabeth.fogerty@fitchratings.com

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Contacts

Fitch Ratings
Primary Analyst
Xavier Olave, +1-212-612-7895
Associate Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Paula Garcia, +562-2-4993316
Director
or
Committee Chairperson
Daniel Kastholm, CFA, +1-312-368-2070
Managing Director
or
Media Relations
Elizabeth Fogerty, +1-212-908 0526 (New York)
elizabeth.fogerty@fitchratings.com