Repsol YPF Up The Ante In The Vaca Muerte Shale

A recent resource audit sponsored by Repsol YPF (OTCBB:REPYY) estimates that the Vaca Muerta Shale formation in Argentina has gross prospective resources of more than 21 billion barrels of oil equivalent (BOE). The audit was conducted by Ryder Scott, a leading Untied States based oil and gas consulting firm. To know more about oil and gas, read Oil And Gas Industry Primer. Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

Vaca Muerta Shale
The Vaca Muerta Shale is estimated to be present in a 7.4 million acre portion of Neuquén province in Argentina. Repsol YPF has approximately 3 million acres under lease that is prospective for the Vaca Muerta Shale.

Resource Audit
Ryder Scott conducted its resource audit on a 2 million acre portion of the Vaca Muerta Shale, and assessed the non-conventional hydrocarbon potential of this play in that area. Repsol YPF controls approximately 1.24 million acres in the area that was audited.

The audit found that the Vaca Muerta Shale has gross prospective resources of 21.167 billion BOE in the area under study, with Repsol YPF's share at 12.35 billion BOE. The contingent resources in the area total 1.525 billion BOE, with 1.213 billion BOE net to Repsol YPF.

Repsol YPF Activity
Repsol YPF started exploring the Vaca Muerta Shale in 2009 and has spent $300 million to date on the play. The company has drilled 28 new wells in two different parts of its acreage through the end of January 2012.

Of these wells, 24 are vertical and it reported that 20 of the wells produced at initial rates between 180 and 600 BOE per day. The company has also completed four horizontal wells and is currently evaluating the results.

It estimates that the cost to develop only the contingent resources in the small area that it explored would cost $42 billion. The development of this area would require 3,000 development wells and an additional 100 rigs, and lead to a 50% increase in Argentinean oil and gas production.

Other Operators
There are several U.S. based oil and gas companies active in exploring and developing unconventional resources in the Neuquén province in Argentina. Apache Corporation (NYSE:APA) is involved and in 2012 plans to drill its first well to test the shale oil potential of its acreage. The company has allocated $250 million in capital in 2012 for this project and several others in Argentina.

EOG Resources (NYSE:EOG) is also at an early stage of development and is currently drilling the company's first shale oil well here. The company expects results in the third quarter of 2012. Exxon Mobil (NYSE:XOM) has interests in the Neuquén Basin and started drilling two wells in December 2011.

The Bottom Line
Argentina may have even more unconventional resources than previously thought, and may be the first area outside of North America to develop this trove of shale oil and gas. This exploration and development is being led by Repsol YPF and other various U.S. based oil and gas companies. 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.