YPF Sociedad Anomina (NYSE:YPF) is planning the large scale development of a recently discovered shale oil play in Argentina, as the company looks to replicate the successful development of similar formations in the United States.
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YPF is an Argentinean oil and gas company that is majority owned by Repsol YPF SA (OTCBB:REPYY). The company reported proved reserves of one billion barrels of oil equivalent (BOE) as of the end of 2009, with approximately 54% of these reserves composed of crude oil.
Vaca Muerta Shale
The Vaca Muerta shale formation is present on approximately 7.4 million acres in Neuquén province in Argentina, and produces a mix of crude oil, natural gas and natural gas liquids. YPF has an interest in approximately three million acres and estimates that 75% of its acreage is in the oil window of this play.
In November 2011, YPF reported on the first stage of an exploration and development program that included 15 vertical wells at Loma La Lata Norte. The wells were all successful and produced from 200 to 600 BOE per day on a restricted choke. The company estimates that its technically recoverable resource potential in this area is 927 million BOE.
This resource estimate is significant because the Loma La Lata Norte area comprises only 105,000 acres out of the company's total position of three million acres.
YPF also reported that the oil produced from wells at Loma La Lata Norte was of high quality, with API gravity from 40 to 45 degrees.
YPF has also started exploration of a second area to the north of Loma La Lata Norte, and reported a recent well here with production of 400 BOE per day. YPF did not provide an estimate on the technically recoverable resource potential at this second area because the exploration is at an early stage. (To know more about oil and gas, read Oil And Gas Industry Primer.)
Other Argentina Players
EOG Resources (NYSE:EOG) has 100,000 acres in Argentina and is also targeting the Vaca Muerta Shale. The company plans to start drilling exploration wells in early 2012.
Exxon Mobil (NYSE:XOM) is also involved in Argentina and in September 2011 pledged to spend $120 million on exploration in Neuquén province. The company was awarded concessions in two exploration blocks in early 2011.
Apache (NYSE:APA) has been involved in Argentina for more than a decade and has interests in Neuquén and three other provinces. The company has three million acres to explore and develop, and reported 7% of the company's total production from Argentina in 2010.
The Bottom Line
The shale revolution is about to jump to South America as YPF moves to develop the Vaca Muerta shale in Argentina. Early results by the company indicate that this play may one day rival more established unconventional plays in North America. (For additional reading, check out A Guide To Investing In Oil Markets.)
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At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.
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