Norwegian energy giant
) intends to join hands with Argentine state-controlled energy
company YPF SA to develop the Latin American country's massive
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The companies are in talks for a potential joint venture to
develop YPF's shale reserves. YPF is seeking to raise funds after
the country's regulatory body expropriated a controlling stake in
the company from Spanish oil firm Repsol.
Argentina - holding the third position in the world with respect
to shale gas reserves after the US and China - needs huge foreign
investment and technology to tap those resources and bring them
into production. However, the South American nation remains
barred from the global credit markets and faces lawsuits from
As per the U.S. Energy Information Administration, Argentina's
shale reserves hold 774 trillion cubic feet of gas and 23 billion
barrels of oil equivalent. These are mainly in the Vaca Muerta
rock formation and are equally prolific like Eagle Ford,
Haynesville and Marcellus in the US.
In September, U.S. energy giant
) signed an agreement with YPF to explore unconventional energy
in Argentina. The deal is likely to close in the first quarter of
2013. Additionally, YPF is expected to close a deal with Bridas
Energy Holdings Ltd. before the end of this year.
For Statoil, we have a favorable outlook on its long-term
production growth, given the company's growing upstream presence
in the emerging basins of the Barents Sea, West Africa and the
deepwater U.S. Gulf of Mexico. We also believe that the growing
share of natural gas in Statoil's Norwegian Continental Shelf
volume mix and its extensive interests in infrastructure assets
enable it to play a leading role in the European natural gas
Recently, Statoil, in its effort to maximize yield, has
significantly enhanced oil recovery at its Peregrino field
through the use of new technology. The company currently
estimates augmented production volumes from the field in the
range of 300 million to 600 million barrels. In February 2012, it
made a high-impact Pao de Acucar discovery in BM-C-33, along with
its partner - state-owned
Petroleo Brasileiro SA
) - and Pepsol Sinopec, the operator. The company holds a key
position as a long-term operator.
Although management said that it would deliver a compound annual
production growth rate of around 3% between 2010 and 2012, the
company was cautious about the uncertainty arising from gas value
over volume, start-up and ramp-up, and operational regularity.
Thus, it remained skeptic about its growth target. The company
expects its 2013 production to remain somewhere around the 2012
Statoil holds a Zacks #4 Rank, which is equivalent to a Sell
rating for a period of one to three months. Longer term, we
maintain our Neutral recommendation on the stock.