Shares of energy companies, in free fall

Companies carry bad news since the year started. The collapse in the Stock Exchanges is the common denominator and in the country local crises are added

2020 for companies energetic Globally, it started with bad news: first, the fall in the international price of oil to $ 30 a barrel, driven by Saudi Arabia’s unilateral decision to increase its production so as not to give up market shares in early March, amid a dispute with Russia in the framework of the Organization of Petroleum Producing Countries (OPEC).

And second, something that was already implicit in Riyadh’s decision and that weeks later would end up getting worse: the expansion of the pandemic of the coronavirus, which will end up affecting the recovery of the global economy and will impact not only energy companies, but all global value chains.

Since March 11, the day on which the Saudi state company Aramco announced that it would begin to expand its crude oil production and marketing capacity, the international price of a barrel of Brent oil fell more than 50% from 53.27 to 25.63 dollars last March 23, according to data from the Bloomberg news agency.

Shares of companies on the world’s major exchanges followed that trend: Shell’s stock price plummeted 60% in New York, from $ 62 in early January to $ 25 earlier this week.

Something similar happened with the rest of the leading companies: in three months both ExxonMobil, Chevron, Total and the British BP fell by around 50%.

Market volatility in response to the OPEC price war and the impact of the crisis unleashed by the coronavirus it did not take long to reach Argentine companies.

YPF’s listing on the New York Stock Exchange fell 68% from $ 11 in early March to $ 3.5 this week.

The state company, hit like others in the private sector by the freezing of fuel prices, had already announced earlier this month at a press conference with investors that this year it would reduce investments by 20% compared to 2019 due to the fall of international prices and uncertainty in the sector.

It is not yet known whether the worsening global and local situation would generate an even bigger cut in both these projections and the company’s dividend policy.

The drop in the value of the companies does not seem to have a floor yet, beyond an occasional rebound due to opportunity purchases by investors or a policy of repurchase of shares by the companies themselves.

However, the continuity of this policy is limited by the companies’ own cash generation capacity, which is faced with the dilemma of allocating those resources to sustain their value on the stock market or to face current expenses and capital investment.

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