) inked a memorandum of understanding (MOU) with South American
energy firm, YPF SA to evaluate and explore the region's
conventional and unconventional resources in the province of
Neuquen. However, none of the companies disclosed the financial
terms of the agreement.
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The companies intend to appraise the acreage spanning over Vaca
Muerta basin that is estimated to hold approximately 23 billion
barrels of oil. San Ramon, California-based Chevron and Argentina's
state-controlled YPF will also be involved with the exploration of
oil from mature fields with the use of advance technology.
Argentina - which holds the world's third largest shale reserves
after China and the U.S - is highly pepped up to develop the
country's oil and natural-gas sector with the help of foreign
collaboration over the next five years.
However, this deal has faced a lot of opposition from Spanish oil
company Repsol SA, which used to be YPF's parent company. Earlier,
in April, this year, the authority of Argentina had expropriated
51% of YPF from Repsol - which currently holds 12% stake in YPF.
Following this move, Repsol demanded a compensation of about $10
billion from the Government of Argentina, which is yet to be paid.
Hence, Repsol has threatened to take a legal action against this
agreement to prevent any third party to benefit from the illegally
Chevron is one of the leading energy companies in the world with an
impressive business model. Its current oil and gas development
project pipeline is among the best in the industry, boasting of
large and multi-year projects.
However, being one of the largest integrated oil and gas companies
in the world, Chevron is particularly susceptible to the downside
risk from continued weakness in the global economy. We are also
concerned by the company's high level of capital spending, which
may result in reduced returns going forward.
We expect the stock to perform in line with the broader market and
maintain our Neutral recommendation. Chevron - the second-largest
U.S. oil company by market value after
) - currently retains a Zacks #3 Rank (short-term Hold rating).