YPF Sociedad Anonima YPF, an Argentine state-run energy company foresees its shale production to rise 35% this year as the cost of production in the Vaca Muerta shale play continues to fall, where the company recently completed drilling its first 3,200 meters long lateral well.

Following the last year's decline of 5.3% output from mature fields in the Vaca Muerta shale, production there is expected to fall 2-3% more in 2018. The company’s total production in the year declined from 577.4 thousand barrels of oil equivalent per day (Kboed) in 2016 to 555 Kboed in 2017.

To counter the situation, YPF wants to drill 100 new wells in 12 distinct regions of Vaca Muerta shale play this year. The company expects the increase in production from the shale play to more than offset the declining output from the matured fields in 2018.

The production ramp up will be supported by declined drilling costs for horizontal wells in the region. The cost was $3,050 per lateral foot in 2015 and $2,270 in 2016. In the fourth quarter of 2017, the cost fell more amounting to $1,390 per lateral foot. It is also expected to reduce the company’s overall cost, which increased 19.5% in 2017 year over year.

Notably, the company has a total acreage of around 5.5 million acres in the prolific shale. In 2018, the company is expected to launch five pilot projects in the shale, one of which will be aided by Statoil ASA STO, the Norwegian oil giant. 

The rise in production and declining costs are expected to push the company’s revenues for the year 2018. The Zacks Consensus Estimate for the company’s revenues in 2018 is expected to grow 13.9%.

Price Performance

YPF has gained 5.7% in the last year compared with 10% growth of its industry.

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About the Company

YPF is an international energy company, based on the integrated business of hydrocarbons, focalized in Latin America, with high standards of efficiency, profitability and responsibility. They have a dominant position in Argentina's exploration, production, refining and marketing sectors, as well as a growing presence in petrochemicals. Found in 1977, YPF is based in Buenos Aires, Argentina.

Zacks Rank and Stocks to Consider

YPF has a Zacks Rank #3 (Hold).

A few better-ranked stocks in the oil and energy sector are ConocoPhillips COP and Pioneer Natural Resources Company PXD, both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Houston, TX-based ConocoPhillips is an upstream energy player. Its revenues for first-quarter 2018 are anticipated to improve 9.6% from the prior-year quarter. The company witnessed a positive average earnings surprise of 144.5% in the trailing four quarters.

Irving, TX-based Pioneer Natural Resources is an independent oil and gas exploration and production company. Its revenues for first-quarter 2018 are expected to improve 22.8% from the year-ago quarter. For 2018, the bottom line is anticipated to be up 185.7%.

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