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.

Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

Summary
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.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Stock Analysis

    Glencore Vs. Noble Group

    Read about the differences between Glencore and Noble Group, two companies in the commodities business. Learn about accounting accusations facing Noble Group.
  2. Stock Analysis

    Will Virtusa Corporation's Stock Keep Chugging in 2016? (VRTU)

    Read a thorough review and analysis of Virtusa Corporation's stock looking to project how well the stock is likely to perform for investors in 2016.
  3. Stock Analysis

    The Top 5 Platinum Penny Stocks for 2016 (PLG, XPL)

    Examine five penny stocks in the platinum mining business that investors may wish to consider adding to their investment portfolios for 2016.
  4. Stock Analysis

    Analyzing Porter's Five Forces on JPMorgan Chase (JPM)

    Examine the major money-center bank holding firm, JPMorgan Chase & Company, from the perspective of Porter's five forces model for industry analysis.
  5. Chart Advisor

    Watch This ETF For Signs Of A Reversal (BCX)

    Trying to determine if the commodity markets are ready for a bounce? Take a look at the analysis of this ETF to find out if now is the time to buy.
  6. Investing News

    What You Can Learn from Carl Icahn's Mistakes

    Carl Icahn has been a stellar performer in the investment world for decades, but following his lead these days could be dangerous.
  7. Stock Analysis

    Analyzing Dish Network's Return on Equity (ROE) (DISH, TWC)

    Analyze Dish Network's return on equity (ROE), understand why it has vacillated so greatly in recent years and learn what factors are influencing it.
  8. Investing Basics

    The Importance of Commodity Pricing in Understanding Inflation

    Commodity prices are believed to be a leading indicator of inflation, but does it always hold?
  9. Fundamental Analysis

    5 Must-Have Metrics For Value Investors

    Focusing on certain fundamental metrics is the best way for value investors to cash in gains. Here are the most important metrics to know.
  10. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
RELATED FAQS
  1. When does a growth stock turn into a value opportunity?

    A growth stock turns into a value opportunity when it trades at a reasonable multiple of the company's earnings per share ... Read Full Answer >>
  2. What is the formula for calculating EBITDA?

    When analyzing financial fitness, corporate accountants and investors alike closely examine a company's financial statements ... Read Full Answer >>
  3. How do I calculate the P/E ratio of a company?

    The price-earnings ratio (P/E ratio) is a valuation measure that compares the level of stock prices to the level of corporate ... Read Full Answer >>
  4. How do you calculate return on equity (ROE)?

    Return on equity (ROE) is a ratio that provides investors insight into how efficiently a company (or more specifically, its ... Read Full Answer >>
  5. How do you calculate working capital?

    Working capital represents the difference between a firm’s current assets and current liabilities. The challenge can be determining ... Read Full Answer >>
  6. What is the formula for calculating the current ratio?

    The current ratio is a financial ratio that investors and analysts use to examine the liquidity of a company and its ability ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center