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Gold/Mining/Energy : Big Dog's Boom Boom Room

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To: Dennis Roth who wrote (151000)	9/13/2011 10:20:50 AM
From: Dennis Roth	1 Recommendation Read Replies (1) of 206093

YPF Sociedad Anonima (YPF) - Believing in higher prices and shale Initiating coverage with an Outperform rating and a $50/sh target price 46 pages, 83 Exhibits Link: sendspace.com excerpt: We believe that investors can access a number of attractive themes in Argentinean energy via YPF shares. YPF is one of the few oil companies globally that has an upside risk to its realised fuel prices, despite the timing uncertainty for a wider energy reform in Argentina. The company is also exposed to a significant resource potential in unconventional resources that in our opinion is not being valued by the equity markets. We initiate coverage with an Outperform rating and a $50/sh target price which does not incorporate any value for shale oil. Increasing oil, gas and refined products price is possible even without a wider energy reform in Argentina, something which is illustrated by the fact that YPF has already increased fuel prices 17% YTD, despite this being an election year. Therefore we think YPF is currently in an unique position of facing an upside risk to its realised fuel prices at a time when wider commodity prices have remained persistently high amidst volatile markets. Unconventional resources potential is starting to show-up. And don’t forget Guyana. Pricing incentives and the experience with U.S shale are putting Argentina’s unconventional resources in the oil industry spotlight. After announcing a 150mmboe shale oil discovery in May, YPF has a busy drilling schedule of 30 wells planned before year end. We see a risked value of $8.4/share for Argentinean unconventional resources that is currently not being valued by the equity markets in our opinion. Furthermore, there is the possibility of a significant event if the Jaguar well in Guyana proves successful this October, worth $2.7/sh unrisked. Implied price convergence in 2025 plus 8.7% dividend yield. Reversing our DCF tells us the shares are implying domestic-international price convergence in 2025, which we find conservative. Savvy cash-flow management enables YPF to distribute 90% of its profits, with the shares offering a sector leading 8.7% dividend yield.

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