YPF, American Energy Partners agree to Vaca Muerta JV

YPF SA and American Energy Partners LP have signed a joint venture agreement to explore and develop unconventional oil and natural gas from Argentina’s Vaca Muerta formation providing that financing can be arranged.

The companies plan to invest more than $447 million during an initial 3-year phase to develop a pilot project in a 200-sq km area called Bajada de Anelo in Neuquen, YPF said. Terms also call for the two companies to work with Pluspetrol SA and Gas y Petroleo del Neuquen SA in developing a second, smaller area within Vaca Muerta called Cerro Arena.

American Energy Partners was formed by Aubrey McClendon, former chief executive officer at Chesapeake Energy Corp., which has experience in various US unconventional plays.

“The execution of the projects will begin once definitive agreements have been signed, and certain conditions have been met,” YPF said in a regulatory filing.

American Energy Partners would finance most of the initial investment, and it has 3 months to arrange private-equity financing before the joint venture is reaffirmed. No additional details were immediately available regarding the financing.

People familiar with the agreement told the Wall Street Journal that YPF and American Energy Partners plan to drill more than 20 wells and build gas processing plants.

Production from the giant Vaca Muerta shale play in Argentina is expected to double by 2018, according to a recent development study from research and consulting firm Wood Mackenzie Ltd.

WoodMac last year released a study showing Vaca Muerta oil and gas output in 2016 should be moderate with year-over-year production at 10%. WoodMac estimates total capital spending for 2016 to reach $1.2 billion as companies prepare for full development (OGJ Online, Nov. 19, 2015).

Horizontal wells will become the development of choice as operators are increasingly able to target the most productive intervals of the play, WoodMac said, adding that it anticipated 200 wells would be brought on stream in 2015 and fewer in 2016 as vertical wells are phased down. About 460 wells were producing in late 2015, WoodMac said when it released its study.

“YPF [SA] and its [joint venture] partners continue to decrease drilling and completion costs aiming to move into ramp-up and development phases,” explained Horacio Cuenca, WoodMac research director for Latin America.

Contact Paula Dittrick at paulad@ogjonline.com.

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