Soros Signals Argentina’s Shale is Biggest Place to Be

One of the world’s legendary investors is upping his bet on Argentina’s shale oil and gas industry in a show of confidence for shale production in South America’s largest unconventional prize —and a big boost for both supermajors and smaller players making big waves in the heart of new discovery areas.

George Soros has doubled his stake in YPF SA, the state-owned oil company in Argentina, which sits atop some of the world’s largest shale oil and gas resources, and is about to get even larger following a new discovery over the last couple of weeks of a second key shale play.

Argentina holds an estimated 27 billion barrels of technically recoverable oil and 802 trillion cubic feet of technically recoverable shale gas, much of it located in the Vaca Muerta, an enormous shale formation in the Neuquen basin — the second-largest shale gas deposit and the fourth-largest shale oil deposit in the world.

And on Aug. 14, YPF announced the discovery of oil in another shale formation—Agrio shale–in the same basin.

Some estimates suggest that combined, the two plays’ reserves could be worth as much as $3 trillion.

“I am very excited with this [Agrio] discovery that proves that Vaca Muerta and Chubut’s D-129 formation aren’t the only shale deposits we have to exploit in Argentina,” YPF CEO Miguel Galuccio told reporters, according to Bloomberg. “The tests are very promising but still, it is too soon to provide figures.”

Related Article: Researchers Call For New Approach To Recycling Fracking Waste Water

In the meantime, Soros’ confidence helps override some negative incidents that had held back investment in Argentina’s shale, including the government’s 2012 expropriation of YPF, then owned by Spanish firm Repsol, and the government’s failure to make a July 30 bond payment, which has resulted in a standoff with a hedge fund over unpaid bills back to the last default in 2001.

The government of Cristina Fernandez de Kirchner, however, has taken steps to repair Argentina’s relationship with international markets, and even tweaked tax laws in 2013 to give special benefits to big oil companies willing to invest more than $1 billion in the country.

The move was immediately followed by Chevron’s announcement that it would enter into a joint venture with YPF. To incentivize the global energy industry to further invest, additional steps are being taken, including discussions for a new hydrocarbon bill that could further standardize and incentivize the industry for both supermajors and mid-sized companies.

The newest discovery is certainly vindication for Soros’ gamble on Argentina. His company, Soros Fund Management LLC, took a strong position in YPF in the second quarter of this year, doubling its position. It now controls 3.5 percent of YPF’s American depositary receipts, worth $450.5 million.

Soros’ move suggests that his firm is not focusing on the short-term problems facing Argentina, but believes that the geological fundamentals are more important. By increasing his stake in YPF, he is betting that Argentina is sitting on some lucrative plays that could be bigger than the Eagleford or Bakken in the United States.

According to the Financial Times, “Some of the world’s largest hedge funds have been snapping up Argentine stocks, betting on an economic recovery in the country even though it defaulted on its debt for the second time in 13 years.”

Related Article: 10 Points About China’s Pursuit Of Natural Gas

And while the market has caught on to the ‘Soros Factor,’ it hasn’t yet caught on to the smaller companies that are positioned to benefit from the Vaca Muerta shale and the new Agrio find.

The Neuquen basin is also where YPF, in partnership with Chevron, is producing crude from the Vaca Muerta shale and is expecting to have nearly 300 wells drilled in the Loma Campana/Loma La Lata area.

It’s great news for Chevron, but it’s also great news for smaller players with big footprints on this scene who will benefit from all the supermajor drilling in the emerging Vaca Muerta and the new Agrio shale formations—as well as from the confidence boost provided by Soros.

There are only a few junior companies who have significant land holdings in Argentina’s Neuquen Basin, among them, Madalena Energy Inc., which will benefit from Chevron’s plans to drill 300 wells just west of the junior’s Coiron Amargo block.

The point is that as the supermajors drill, the smaller companies reap the benefits, positioning themselves for big rewards with big players who are eyeing their large tracts of land in this promising basin.

“Given the size of the resource prize in both Vaca Muerta and Agrio, Argentina is home to one of the biggest unconventional plays in the world,” said Kevin Shaw, CEO of Madalena Energy, which controls around 1 million net acres in Argentina and plans to begin shale development in the Agrio formation later this year or in early 2015.

“Some of the largest oil companies around the globe are continuing to actively drill and appraise     Argentina’s Vaca Muerta shale and  are now starting to do work in the Agrio shale,” Shaw said.

For oil and gas explorers both big and small, Argentina is back–with possibly more shale than the United States, and the industry is more active than ever..

Like Warren Buffet, when George Soros makes a big move, people notice. Their decisions, which sometimes run counter to conventional wisdom, are often seen in hindsight as signals of trends that few investors are noticing.

Source: http://oilprice.com/Energy/Crude-Oil/Soros-Signals-Argentinas-Shale-is-Biggest-Place-to-Be.html

By. James Stafford of Oilprice.com

Facebooktwittergoogle_plusredditpinterestlinkedinmail
This entry was posted in Business / Economics, Energy / Environment. Bookmark the permalink.
  • kimyo

    why the propaganda george?

    it’s like obama said to me ‘if you like your washington’s blog you can keep your washington’s blog’.

    Trader Who Scored $100 Million Payday Bets Shale Is Dud

    In his counterarguments, he digs deep, delving into the minutiae of how Texas discloses oil production, the tendency of some shale wells to play out quickly and the degree to which the boom has relied on debt. The simplest of his reasons, though, is that producers have already drilled in many of the best areas, or sweet spots. Hall predicts that growth in shale output will begin to moderate this year and U.S. production will peak as soon as 2016.

    “Once those areas have been drilled out, operators will have to move to more-marginal locations and well productivity will fall,” Hall wrote in March. “Far from continuing to grow, production will start to decline.”

    So far this year, there are signs that he may be on the right track. In North Dakota’s Bakken and Texas’ Eagle Ford formations, which have accounted for almost all of the jump in U.S. output, the combined year-over-year growth in production in July fell below 30 percent for the first time since February 2010. Two central questions about technology and shale will likely determine the outcome for Hall: how
    many wells producers will be able to drill in a finite amount of land that sits atop oil-bearing layers of rock and whether the U.S. renaissance will be repeatable abroad. Hall is betting no on both counts.

    (using italics to mark the most irony-laden bloomberg biased bits)

    it’s not a renaissance if it barely lasted for a decade and never even remotely came close to u.s. energy independence. not to mention leaving behind multi-hued wastewater ponds like this:
    Utah fracking fine highlights wastewater pond threat

    i can’t find the link at the moment, but gail tverberg makes a compelling argument that oil prices will fall as a result of oil companies redirecting funds away from exploration and towards stock buybacks.

    • TAYLOR6135

      W­­­­­ould­n’t be ni­­ce to ha­­­­ve an extra 3000/month? Start freelancing today and you could join others who are getting this extra income every month… Find out more about it herehttp://www.onlinemoney/2014/6/14..,….,,..

    • T. Matson

      False–but Obama and his fellow Marxist are trying every trick up their sleeves to stop the growth in both Oil and Gas production with ever new regulations–and of course the fake public outcry against the “unsafe” oil trains–which is beyond stupid since apparently imported Oil is safe to transport(imported oil typically has higher sulfur content) versus domestically produced oil that actually produces US jobs, creates domestic wealth and helps moderate/lower the price of oil(hence the Saudi’s aren’t happy)……………..

  • T. Matson

    They will never produce anywhere near what the shale deposits do in the US for the simple reason of property rights(or lack there of)–the government in Argentina like most crooked nations OWNS the mineral rights–hence the massive number of drilling rigs like we see operating in the US will never go up, only Super large plays will get developed–not the entire basin like in the US.