Bloomberg News

Repsol YPF Boosts Argentine Oil Resources to 23 Billion Barrels

February 14, 2012

Feb. 9 (Bloomberg) -- Repsol YPF SA’s Argentine unit said its shale oil resources at the Vaca Muerta formation in the south of the country probably hold about 23 billion barrels, almost half the size of Brazil’s so-called pre-salt reserves.

The new estimates come after further drilling in the Connecticut-sized area of Argentina’s Neuquen province and reviews of the area by independent auditor Ryder Scott, YPF said late yesterday in a statement. YPF, the local unit of Madrid- based Repsol, previously discovered about 927 million barrels at the Loma La Lata field, which is located in the formation.

YPF, producer of more than half Argentina’s crude, is boosting exploration to arrest output declines amid government criticism that local oil companies are failing to invest in production. The resources at Vaca Muerta compare with the 50 billion barrels of oil Brazil estimates it’s found underneath a thick layer of salt beneath the seabed and which include the largest fields discovered in the Americas in three decades.

“There’s a tremendous amount of resource potential for YPF to develop,” Matthew Portillo, an analyst at Tudor Pickering Holt & Co., said yesterday in a telephone interview from Houston. “It’s an impressive number in terms of the potential size and scope of Vaca Muerta within Argentina.”

American depositary receipts in Buenos Aires-based YPF climbed as much as 12 percent to $36.30 yesterday in New York and closed 11 percent higher at $35.90. Repsol rose 0.5 percent to close at 20.68 in Madrid, before the news was announced.

Repatriate Revenues

In October, the government ordered oil and mining companies to repatriate export revenues and in November opposed a dividend payment for YPF as it seeks to stem capital flight. YPF was one of nine companies that also lost financial incentives for oil exploration and production on Feb. 3., following speculation that the government may consider nationalizing the company.

The government could use central bank reserves to pay for a takeover of YPF, Sebastian Vargas, an economist at Barclay’s Capital, said yesterday in a report to clients.

YPF’s previous 927 million barrel estimate came from surveying 3 percent of the 12,000 square kilometers of Vaca Muerta licensed to the company, Chief Executive Officer Sebastian Eskenazi said in November. The 927 million resources are so-called prospective resources while the 23 billion are so- called contingent resources. Contingent resources include resources that may not be commercially viable.

Vaca Muerta

The Vaca Muerta formation, located in Patagonia, is almost the size of Connecticut, which is 12,997 square kilometers, or 5,018 square miles. Ryder Scott’s study covered an area of 8,071 square kilometers, in which YPF holds 5,016 kilometers.

The Loma la Lata discovery was Repsol’s largest ever and YPF’s largest since at least the early 1990s. The new resources may be the biggest in the Americas since at least the 1970s if the contingent resources are transformed into reserves.

Argentina’s government has discussed nationalizing YPF, Pagina/12 newspaper reported Jan. 29, without saying where it got the information. Pagina/12 regularly runs interviews with top government officials such as Vice President Amado Boudou, who have said that the company needs to do more on production.

YPF may not be able to sustain dividend payments equal to 90 percent of the company’s annual net income amid pressure from the Argentine government, Deutsche Bank AG said in a Feb. 6 note to clients. Repsol, Spain’s largest oil company, owns a 57 percent stake in YPF, while the Eskenazi family’s Petersen Energia SA owns about 25 percent of YPF and operates it.

Brufau Visit

Antonio Brufau, chief executive officer of Repsol, met Argentina’s planning and economy ministers Feb. 6 to discuss the government’s criticism, news agency EFE reported, citing people close to the meeting which it didn’t identify.

Repsol said in November that Loma la Lata’s shale oil is similar in volume to YPF’s existing reserves and its largest find. The company said Vaca Muerta is among the world’s largest and highest quality so-called non-conventional oil and gas resources. YPF is the world’s second-largest company in non- conventional acreage, auditors Wood Mackenzie said at the time.

Repsol is also exploring in Brazil’s Santos, Espirito Santo and Campos basins, including minority stakes in the Guara and Carioca discoveries where the company estimates recoverable reserves of as much as 3 billion barrels.

Repsol last year sold a 40 percent stake in its Brazilian business to China Petrochemical Corp. for $7.1 billion in a deal that valued the Spanish company’s remaining stake at about $10.7 billion. It invested $2 billion in exploring the site.

Brazil Discovery

The discovery of offshore oil in Brazil led to a surge in the market value of state-controlled oil producer Petroleo Brasileiro SA, which has about 16 billion barrels of reserves. Discoveries including the Lula and Franco fields contain billions of barrels and are the largest finds in the western hemisphere since Mexico’s Cantarell in 1976.

Total world resources of oil shale, which is more expensive to produce than conventional oil, are conservatively estimated at 2.6 trillion barrels, and the amount of shale oil that can be recovered depends on “many factors,” according to the Energy Minerals Division of the American Association of Petroleum Geologists.

Shale formations contributed to a boom in U.S. oil output that reached a 9-year high in October, according to Energy Department data.

--Editors: Dale Crofts, Robin Saponar

To contact the editor responsible for this story: Dale Crofts at

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