Argentina's default won't harm efforts to become self-sufficient in oil and natural gas by tapping vast shale reserves, according to Seaport Group and state energy company YPF (YPF -3.9%).
YPF oversees Argentina’s shale oil and gas reserves, and thus will have continuous access to financial markets, Seaport says, adding that YPF may structure securities where its earnings are escrowed outside the country for use in repaying debt and receive attractive terms.
YPF says it will generate enough cash to finance operations for the next 12 months and has access to new funding sources; the company has said it needs to fund a $35B investment plan over the next five years.
A one-day strike by 23K workers in the energy-rich Neuquen basin will cost YPF (YPF +2.9%) as much as $12M and cut production by 160K barrels of oil and 6M cubic meters of gas, the company says.
The workers are striking as provincial governors and federal authorities discuss changes to Argentina’s hydrocarbons law; the outcome will determine how revenue from the Vaca Muerta formation, which holds the world’s fourth-biggest shale oil reserves and second-largest shale gas reserves, are distributed.
The Neuquen basin is responsible for 40% of Argentina’s oil output and 56% of natural gas output, YPF says.
Dan Loeb's Third Point hedge fund is renewing a bet on Argentine government debt, expecting the country will reach a deal with creditors to resolve claims from its 2001 default by the end of the year, and is taking a stake in state-controlled oil company YPF (YPF +5.2%).
"We are in the midst of a critical inflection period for the country: If the government settles with its hold-out creditors, Argentina will regain access to global capital markets,” according to the hedge fund's Q2 letter to investors.
Third Point says Japan has been the biggest source of losses this year, but the firm is still finding opportunities in the country and expects macro conditions that have been headwinds to become more favorable toward the end of the year.
Earlier: YPF pops as Third Point is said to increase stake.
Chevron (CVX -1.8%) signs a deal with YPF (YPF -1.2%) to invest $1.6B this year to continue development of Argentina’s Vaca Muerta shale formation and become the country’s largest foreign producer of shale oil and natural gas.
Chevron says it will build off the progress of its 2013 drilling program with YPF, investing in drilling 170 wells in the 96K-acre Loma Campana concession.
The joint venture partners are targeting eventual daily output of 50K barrels of shale oil and 3M cubic meters of shale gas by drilling 1,500 wells.
YPF (YPF +6.8%) is in the market with a $500M global bond issue today, the first time it is raising debt after Argentina's government last year expropriated Repsol's majority stake.
It is not yet known whether YPF is tapping the market to finance capital spending or to partly finance the ~$5B it has agreed to pay Repsol for the stake; if YPF ends up using the money in Argentina, analysts say it would be beneficial to the country which faces a scarcity of dollars.
The five-year bond has an initial guidance of a 9% yield.
Full development of the huge Vaca Muerto reserves, which could cost tens of billions of dollars and take a decade or more, hinges on better access to international capital markets, thus Argentina's recent agreement to pay Repsol $5B for expropriating its 51% stake in YPF is seen as a critical positive step.
Some U.S. institutional investors and Mexican billionaire Carlos Slim have been buying shares, and this summer's agreement between Chevron and YPF could be a model for the development of Argentina's significant oil and gas reserves.
Argentina's YPF (YPF +5.4%) says it has made a conventional oil discovery in the Mendoza province which it claims will add 15M barrels of crude to its reserves.
The discovery would imply a 2.5% increase in YPF’s total proven reserves at the end of last year of 590M barrels of oil.
The find also demonstrates how conventional discoveries remain an important part of YPF’s portfolio even as attention is focused on the country’s potential in unconventional resources, such as those located in the Vaca Muerta formation.
Repsol asks a World Bank panel to block Chevron's (CVX +1%) $1.24B deal with YPF (YPF -2.7%) to develop shale assets in Argentina's Vaca Muerta formation (now estimated to contain 1,181T cu. ft. of shale gas). Repsol's complaint comes as it disputes the seizure of its 51% stake in YPF by Argentina's government last year; YPF says the claims lack judicial merit since Repsol never owned rights over Vaca Muerta.
Repsol (REPYY.PK) has received a non-cash compensation offer worth $5B from Argentina over the country’s expropriation of Repsol’s stake in Argentinean explorer YPF (YPF -5%), Reuters reports. Mexico’s Pemex, which holds 9.2% of Repsol, is said to be acting as an intermediary in negotiations with the hope of gaining a stake in Argentina's Vaca Muerta shale field. (earlier)
Argentina's Congress passes controversial legislation pardoning tax evaders if they invest their hidden cash in construction projects or use it to buy bonds to help finance state-run oil company YPF (YPF -1.6%). The law aims to bring much-needed U.S. dollars into the economy, but opponents say it places the interests of criminals ahead of law-abiding citizens who pay their taxes. (earlier)
YPF's ambitious program this year calls for drilling 132 oil wells at the Vaca Muerta shale formation in Patagonia, but the high cost of equipment could force it to scale back, CEO Michael Gallucio says after reporting Q4 results. Vaca Muerta holds one of the world's biggest deposits of shale resources, with ~23B boe; YPF has concessions on 40% of the site. YPF +1.7% premarket.
YPF Sociedad Anonima is an integrated oil & gas company. It upstream operation consists of exploration, development & production of crude oil, natural gas & LPG. Its downstream operation includes refining, marketing & distribution of oil, among others.