Spanish oil major Repsol's board of directors unanimously rejected a $5 billion noncash compensation offer from Argentina for its expropriation of energy firm YPF, saying the offer does not reflect Repsol's loss.
The Argentine government took control of Repsol's 51 percent stake in YPF in May 2012, claiming Repsol was underinvesting in the company, sparking a heated dispute with Spain and with Repsol's shareholders.
Repsol has launched several legal suits over a loss that it values at $10.5 billion. It has said it is open to an out-of-court settlement but wants fair compensation in the form of cash, bonds or liquid assets.
Argentina's proposal included a 47 percent stake, estimated to be worth $3.5 billion, for Repsol in a joint venture to develop the country's vast Vaca Muerta shale assets. It also offered Repsol $1.5 billion of capital that would have to be invested in the Vaca Muerta venture, the board said.
The offer would have given Mexico's Pemex, which holds 9.2 percent of Repsol, a 2 percent stake in the Vaca Muerta joint venture.
"Following an exhaustive technical and economic internal analysis, supported by external specialist reports, the board of directors considered (the offer) unsatisfactory for the interests of the company," Repsol's board said in a statement.
However, it said it "welcomed" the Argentine government's willingness to negotiate a solution, but said any deal should follow "the appropriate corporate channels".
Repsol's shareholders - which aside from Pemex include Spanish lender La Caixa, indebted builder Sacyr and Temasek Holding of Singapur - have been divided over sealing a deal on YPF.
La Caixa and Pemex have been orchestrating talks with Argentina in recent months, without the knowledge of Repsol executives, sources with knowledge of the matter said.
Giving Pemex a 2 percent stake in the joint venture was a commission for its role as an intermediary in the talks, the sources said. The involvement of Pemex, with an interest in getting a slice of the vast Vaca Muerta field, also put pressure on Repsol, which has threatened to sue any foreign investor in the valuable shale assets.
The Argentine government has struggled to attract foreign investors in Vaca Muerta, which is estimated to need an annual $25 billion to be fully developed, because of Repsol's legal threats.
Analysts have questioned the wisdom of Repsol re-investing in the country under the current legal framework.
The Spanish company, whose shares and funding were hit by the loss of cash cow YPF, has largely bounced back from the Argentine seizure, posting strong earnings growth since the expropriation and resolving its financing needs.
