YPF said to cut spending in 2016 as $77 crude disappears

BUENOS AIRES, Argentina (Bloomberg) -- Argentina’s YPF SA will cut spending by as much as 20% next year if a new administration lowers the domestic oil price nearer to international levels, according to three people familiar with the plans.

The state-controlled company would lower its 2016 budget from this year’s $6 billion, mainly in operations at the Vaca Muerta shale formation, a YPF official said, asking not to be named as the company’s business plan has yet to be approved. The next administration plans to lower the nation’s crude price to $66, triggering the YPF budget cut, said an official from provinces which own shares in YPF.

YPF will turn more to natural gas as it pulls back from shale, two provincial officials said, asking not to be named as the adjustments will be announced in December when a new president replaces Cristina Fernandez de Kirchner.

The three people spoke assuming Daniel Scioli, the ruling party candidate, will be elected president. Scioli, the current governor of Buenos Aires province, who has received the support from governors of oil producing provinces, would defeat the opposition candidate Mauricio Macri in the first round of voting on Oct. 25, according to a poll by Hugo Haime & Asociados sent by e-mail Wednesday.

YPF has only begun to draft its capital expenditure plan for next year and still can’t comment on the matter, the company said in an e-mailed statement. Chubut’s governor Martin Buzzi, who leads the body that represents the 10 oil-producing provinces, didn’t reply to calls seeking comment.

The Argentine energy producer’s American depositary receipts fell 5.4% to $16.11 at 1:49 p.m. in New York, after touching $15.56, the lowest since July 2013. The ADRs have fallen 39% this year.

While oil majors including BP Plc and Royal Dutch Shell Plc cut spending for more than $40 billion in 2015, YPF kept its capital budget intact from last year, helped by the federal government which fixed a local price for the bbl of oil at $77/bbl, 61% above international benchmark Brent, making motorists subsidize oil drillers.

The price for new natural gas will be maintained at $7.50 per million BTU as Argentina seeks to cut gas imports.