Chevron and YPF Sign $1.24 Billion Vaca Muerta Shale Deal

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on Jul 17, 2013

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Chevron and YPF Sign $1.24 Billion Vaca Muerta Shale Deal

iNVEZZ.com, Wednesday, July 17th: Chevron Corp (NYSE:CVX), the second-largest US energy company, yesterday signed a deal with Argentina’s YPF SA (NYSE:YPF) to develop shale oil and natural gas in Vaca Muerta, thought to be one of the largest formations in the Western hemisphere. Chevron’s share price closed marginally down on the NYSE, whereas YPF’s share price soared in after-hours trading.

Chevron and Argentina’s YPF Sign Vaca Muerta Investment Deal
California-based Chevron yesterday said in a press release that it had signed a deal with Buenos Aires-based YPF for an initial investment of approximately $1.24 billion (£820 million) in the future development of shale oil and gas resources from the Vaca Muerta formation. The partnership was formed in December when the two companies signed an agreement to drill 100 non-conventional oil wells.

“This strategic investment will allow Chevron to take part in the Vaca Muerta, one of the most exciting shale oil and gas plays in the world today,” George Kirkland, Chevron Corp’s vice chairman, said. He added that the deal would enable the US energy giant to grow beyond its 2017 production target of 3.3 million barrels per day.
Chevron said that the initial development phase would involve drilling 100 wells in an area of 20 square kilometres (5,000 acres), known as Loma La Lata Norte, which is currently producing more than 10,000 barrels of oil-equivalent per day.

**Argentinean Shale Investment**
As Reuters reported in its coverage of the news, the deal came after Argentina’s government on Monday published a decree allowing oil companies to export tax-free up to 20 percent of the crude and natural gas they produce in the country. Companies exploring Vaca Muerta and exporting from the area would also be allowed to keep earnings in foreign exchange outside the Latin American country, a benefit denied to other companies which are required to repatriate their earnings.

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The decree is part of Argentina’s efforts to encourage international oil groups to invest in its energy resources, with the country trying to reverse a decline in oil and gas output. The deal is also the first major investment in Argentina’s oil sector since the government expropriated 51 percent of YPF from Spain’s Repsol without compensation. Repsol has brought a lawsuit against YPF, Chevron and other companies looking to partner up with YPF in the Vaca Muerta assets.

The Financial Times quoted YPF’s chief executive Miguel Galuccio as describing the deal as “a demonstration of trust by a great international company”.
“We are putting in production a resource that may change the energy future of our country,” he added.
A report by the US Department of Energy has shown that Argentina holds more natural gas trapped in shale rock than all of Europe, with the bulk located in Vaca Muerta.
**Chevron’s share price closed 0.45 percent at $124.12 in New York on 16 July 2013 and declined 0.06 percent in after-hours trading to $124.05. YPF’s share price closed 2.33 percent higher at $16.27 and rose 3.56 percent to $16.85 in after-hours trading.**