Bank of America has updated its view on Argentina’s oil and gas sector, maintaining Buy recommendations on two leading producers while increasing price targets to reflect a softer country risk profile and company-level catalysts.
The investment bank pointed to improving macroeconomic conditions in Argentina as a constructive backdrop for the sector, noting a reduction in country risk. Both companies cited by the bank carry meaningful exposure to unconventional oil and gas development in the Vaca Muerta formation, which BofA sees as an important growth avenue.
Vista Energy (NYSE:VIST)
BofA reaffirmed its Buy rating on Vista Energy and raised the price target to $100 per ADR from $92 per ADR. The bank outlined three pillars for its positive stance: clearly identifiable short-term macro triggers in Argentina, significant exposure to Vaca Muerta with attractive growth potential, and management that BofA views as having a strong track record and alignment with minority shareholders.
As part of Vista’s company-specific drivers, BofA highlighted the expected completion of an acquisition from Equinor that would leave Vista with a 25.1% working interest in the Bandurria Sur block and a 35.0% interest in the Bajo del Toro block. The bank expects the closing of that deal to be a positive catalyst for the stock.
On the transaction economics, BofA calculates an internal rate of return of 28% for the acquisition, on the basis of its Brent price curve and the assumption that Bajo del Toro is included in Argentina’s RIGI incentive regime. Reflecting the decline in perceived country risk, BofA lowered its weighted average cost of capital for Vista to 12.0% from 12.3%.
YPF (NYSE:YPF)
Bank of America also kept a Buy on YPF and increased its price target to $64 per ADR from $58 per ADR. The bank expects YPF’s corporate story to advance through a combination of rising unconventional production, the divestment of conventional assets, and progress on its liquefied natural gas project.
On the macro side, BofA anticipates supportive news flow following Argentina’s mid-term elections, with the government expected to approve additional structural reforms. The bank cited decompression of inflation, improved fiscal figures, and a recovery in activity as factors that contribute to lower country risk.
Consistent with its view on reduced country risk, BofA trimmed its WACC assumption for YPF to 13.3% from 13.6%.
What this means for markets
BofA’s updates keep both companies in the Buy camp and reflect how a shifting macro backdrop - specifically lower country risk and anticipated reform momentum - can change valuation assumptions for Argentina-focused energy names. The bank’s note places emphasis on Vaca Muerta exposure, transactional catalysts and progress on strategic projects as the principal drivers behind the price-target adjustments.