Shares of Calgary energy firms fall after nationalization

Canadian oil and gas producers operating in Argentina watched their stocks plummet Monday after the South American country announced it was seizing 51 per cent of oil producer YPF SA.

Azabache Energy dropped 24 per cent off its share price to 49 cents, while Madalena Ventures fell the lowest in almost three years, to 61 cents a share Monday.

However, Calgary-based producer Madalena stood its ground while the market continued an exodus from the South American country after President Cristina Fernandez de Kirchner announced her government would take over YPF management.

“For our operations I am not concerned at all,” said Dwayne Warkentin, Madalena’s CEO. “It hasn’t affected our working interest, royalties, oil price, nothing on an economic basis. What it does do is send up warning flags about investment in the country, which is what I am worried about.”

Warkentin, who has worked in Argentina for more than a decade, said his company continues to reinvest in Argentina, selling its 100-plus barrels of oil to local refineries. More importantly, Madalena Ventures is not a former national oil company, he said.

Argentina holds the third largest shale oil and gas reserves in the world, after the U.S. and China. YPF, the country’s largest corporation, was privatized in the 1990s, then bought by Spain’s Repsol. It produces about 34 per cent of Argentina’s oil and gas.

Investors had started backing away from Argentina this month when rumblings of nationalization were beginning to be heard in government corridors.

Canaccord Genuity analyst Frederick Kozak recommended investors look to more stable countries, such as Colombia, for their South American investment holdings, saying they were increasingly uncomfortable with the Argentine political situation.

The government was exhibiting the “classic signs” of a move toward nationalization, Kozak said this month, deflecting public attention with state anniversaries, blaming YPF for Argentina’s falling production volumes and prompting provinces to take back concessions on grounds of insufficient investment.

Azabache was told April 5 to hand over one of its leases to the provincial government in Argentina because of “insufficient investment activity.”

Another Calgary-based producer, Americas Petrogas, fell 14 per cent to close at $2.84 in Toronto, on the news Argentina would be nationalizing YPF. The government will also send a bill to Congress to take a 51 per cent stake in YPF to avoid becoming “an unviable country,” Kirchner said in a speech in Buenos Aires.