Junior oil companies that focus on Latin America are still showing signs of strength despite the difficulties in the global credit market, Arturo Vilas, managing director of investment banking at Tristone Capital's regional headquarters in Buenos Aires, told BNamericas.
While stock prices have trended down, a core group of investors appears to be holding on to their investments in many juniors that focus on the region.
"During the boom times until late last year, you had investors that understood Latin America and others that didn't," Vilas said. "What we are seeing now is that investors are not panicking about the region."
"The Tristone equity price indices for different emerging regions around the globe show that the index for Latin American-focused juniors has dropped less than the equivalent for other regions during 2008, which is encouraging," he added.
Junior companies in the meantime may see short-term difficulties with raising new capital and some may be forced to reduce capex spending.
"The problem for some companies is that right now it's hard for a publically listed company on Toronto or London to raise more equity. This may fix itself in a few weeks or a few months," Vilas said. "It's going to take a lot of good news to restore confidence to the markets, both in the financial markets and the region in general."
Each company's position, however, is different, and many still have cash on hand for new spending.
"As the market is supported more by the core investors that understand the region, there should be a differentiation," Vilas added. "And right now, you are seeing that differentiation. Companies affected by Argentina, for example, have been hit differently that companies located mostly in Colombia."
The complete interview with Vilas will be published in this week's issue of Perspectives to be sent to subscribers on Friday.
