) entered into an agreement with Argentina's largest energy
) for the development of shale gas resources in the South
CHEVRON CORP (CVX): Free Stock Analysis
YPF SA D CV ADR (YPF): Free Stock Analysis
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Per the deal, the shale pilot project will be started with the
drilling of more than 100 wells in 12 months in the Vaca Muerta
area of Patagonia. The expected cost of the project is $1
billion, which will be shared by both the companies. Further,
investment of about $15 billion will be needed to complete the
development of Vaca Muerta, which may have up to 2,000 wells.
The deal also entails the transfer of 50% stake in Loma de la
Lata Norte and Loma Campana fields by YPF to Chevron for which
the oil major enjoys the special right to negotiate for 4 months.
The fields are located in southwestern Argentina and span over
290 square kilometers.
Chevron also plans to explore additional blocks further in
approximately 600 square kilometer area. The cost of the same
will be borne by the company for which it will be given a 50%
stake in those blocks by YPF.
Management at YPF believes that this deal will enhance production
and meet Argentina's energy demand.
San Ramon, California-based Chevron Corporation is one of the
largest publicly traded oil and gas companies in the world, based
on proved reserves. It is engaged in oil and gas exploration and
production, refining and marketing of petroleum products,
manufacturing of chemicals, and other energy-related businesses.
Chevron, in its present form, resulted from the 2001 merger
between Texaco and Chevron Corporation.
We believe that this exploration success will boost Chevron's
growth prospects in Argentina.
However, Chevron's production growth profile depends on the
timely development of upstream projects, almost all of which have
inherent risk factors. Time and cost overruns on these programs
may lead to lower returns going forward.
Chevron currently holds a Zacks #3 Rank (short-term Hold rating).
We also maintain a long-term Neutral recommendation on the stock.