State oil and gas company YPF SA, a crude oil producer and refiner, is cutting spending to shore up its balance sheet as debt payments come to the fore amid the collapse of the oil market.
YPF has nearly US$3 billion of debt is due this year and next, so "strengthening the balance sheet is the cornerstone of our strategy," Sergio Affronti, the firm's new CEO, told investors in a profit call during which the company said it would cut costs and combat the current crisis.
The state business, which is keen to exploit to Argentina's treasure trove of shale at the Vaca Muerta formation, needs to "get back to basics," sacrificing growth to preserve cash, Affronti said.
To maintain liquidity, YPF will seek to refinance soon-to-mature debt, continue to tap local money markets, and rollover a US$1-billion bond payment due in less than a year.
The company's future will also be affected by the government's attempts to reach an agreement with creditors this month on its USS$65-billion sovereign debt restructuring.
YPF has reduced the salaries of some employees by 10 percent, people familiar with the matter told Bloomberg News. The company will also delay investments in drilling, infrastructure and refineries, and continue with divestments, said Sergio Giorgi, vice-president of strategy and business development.
YPF had US$1.16 billion in cash and cash equivalents at the end of the first quarter. That's less than the US$1.33 billion it is due to pay creditors this year. Another US$1.64 billion is due in 2021.
The Argentine gas and oil giant has struggled to reduce its debt, with the company aiming for a long-term goal of 1.5 times its Ebitda (earnings before interest taxes depreciation and amortisation). In contrast, debt increased to 2.2 times Ebitda in the first quarter, from 1.7 a year earlier.
Sergio Affronti, was appointed YPF's new CEO at the turn of the month, faces a tough challenge guiding the company through the coronavirus pandemic. He replaces Daniel Gonzalez, who was named chief executive in April 2018.
It's the second major change at the company since President Alberto Fernández took office in December 2019. The Peronist leader named ex-economy minister Guillermo Nielsen as chairman of the board shortly after taking office.