YPF SA (ADR) (YPF), Chevron Corporation (CVX): Is the World Cup All That Argentina Is Looking Forward To?

Page 1 of 2

Looking toward the future, I’m sure most Argentinians have their eyes set on the 2014 World Cup. The country’s national team is quite often mentioned as a serious contender to bring the Cup back to a South American country. Brazil estimates that more than 600,000 visitors will make their way there for the festivities, and some will undoubtedly filter over to Argentina. However, while the increase in tourism next June and July is likely to help the country’s economy a bit, it won’t come close to what Argentina’s shale oil and natural gas reserves will probably contribute over a much longer time horizon.

Climbing the ranks
As the eighth largest country in the world, Argentina just might have some meaningful energy reserves located deep beneath its soil. The question of how meaningful was answered this week, in the Energy Information Administration’s release of its study of 41 countries’ shale reserves. Much to its delight, I’m sure, the country well known for La Albiceleste ranked fourth in total recoverable shale oil reserves and second in shale natural gas.


This news is obviously great for a country that’s been struggling with its ability to keep up with increased energy demand, along with some pretty serious bouts of inflation recently. But what does it mean for the energy companies that have been risking capital to explore for these reserves? Well, following the country’s nationalization of YPF SA (ADR) (NYSE:YPF) from Repsol last May, it needed some form of positive news to woo companies back.

Chevron Corporation (NYSE:CVX) has obviously taken notice, because it now has plans to invest up to $1.5 billion with YPF SA (ADR) (NYSE:YPF) to develop its Vaca Muerta field. One would be hard pressed to fault Chevron Corporation (NYSE:CVX) for its interest here. The industry believes that as much as 308 trillion cubic feet of natural gas and 16 billion barrels of oil rest in this formation alone. That’s more shale oil in one field than all of Venezuela is forecast to have and more shale gas than Russia’s predicted bounty.

What else is there?
For investors, there are several other companies that have shown a willingness to engage with Argentina in hopes of turning this black gold into greenbacks. Apache Corporation (NYSE:APA) is one global energy company that has carved out a sizable chunk for itself of the Neuquen basin, which houses the Vaca Muerta field. The company currently owns around 1.3 million acres here, or around half of what YPF SA (ADR) (NYSE:YPF) has marked off for itself. The EIA has said that up to 800 million barrels of recoverable shale oil could be produced in this area. Apache Corporation (NYSE:APA) estimates that its proven reserves in Argentina total 102 million barrels of oil equivalent, or around 3% of its global total. As overall estimates continue climbing, Apache Corporation (NYSE:APA)’s business there probably will as well. Its plans to spend around $200 million there this year could be just the start.

Page 1 of 2