YPF seeks partners for deepwater exploration, CEO says

YPF seeks partners for deepwater exploration, CEO says

ADAM WILLIAMS and PABLO GONZALEZ

CANCUN, Mexico (Bloomberg) -- YPF SA is seeking partners for deepwater exploration offshore Argentina, its CEO said.

“Most likely offshore is going to be with a partner,” CEO Miguel Galuccio, 46, said Sept. 26 in an interview at the World National Oil Companies Congress in Cancun.

Argentina’s 10 oil-producing provinces and the federal government agreed Sept. 16 to revise a 1967 energy bill to include shale and offshore exploration. Galuccio will present at a Congressional hearing Sept. 30 the bill that would allow energy companies that invest $250 million over a five-year period to sell 60% of offshore production in international markets without paying export taxes and 20% of shale output.

Galuccio, a former director of Schlumberger Ltd.’s Mexican operations, has increased the Buenos Aires-based producer’s oil output by 5% to 84.2 MMbbl a year since his April 2012 appointment by President Cristina Fernandez de Kirchner. That was when she expropriated 51% of the company from Madrid-based Repsol SA, which prioritized dividends over exploration, causing output to slide.

Galuccio designed the company’s $37 billion, 5-year business plan, primarily to develop Vaca Muerta, a formation the size of Belgium that contains at least 23 Bbbl of oil in southwestern Argentina.

Chevron’s Check

Galuccio has been instrumental in getting international partners for YPF. Chevron Corp., the third-largest oil company by market value, signed a memorandum of understanding with YPF in August 2012 that 11 months later led to a development accord.

Chevron’s initial Vaca Muerta investment of $1.24 billion was later expanded and may reach as much as $16 billion. The joint venture has drilled 130 shale wells since then.

Capital expenditures for 2015 will be similar to the $5.5 billion to $6 billion range of this year, he said.

“We have brought all the rigs into operation,” Galuccio said. “Chevron has cut its check. Everything is going as planned.”

In 2013, YPF signed a similar deal with Dow Chemical Corp. to produce shale gas. On Aug. 28 YPF and Petroliam Nasional Bhd., signed a $550 million accord to develop shale oil at the world’s fourth-largest deposit in Vaca Muerta.

YPF’s American depositary receipts gained 3.6% to close at $37.08 in New York on Sept. 26. The ADRs have surged 167% since Galuccio took his position.

Cash Cushion

The company doesn’t have any immediate plans to sell bonds, Galuccio said, adding that YPF is able to sell locally.

“We are sitting on $1.5 billion in cash that allows us to have the strength to run operations without having to go to market for the next 12 months,” he said.

YPF had its first two international bond sales since 1998 in December and April. Argentina has been locked out of credit markets following a record $95 billion default in 2001. The government is battling with holdout creditors after defaulting for a second time in 13 years on July 30.

YPF would like to be involved in Mexican energy projects in the future as the country opens its doors to foreign investment for the first time since 1938, Galuccio said.

“Unconventional in medium-term will be interesting,” he said. “It will take some time. Onshore and shallow water offshore are also interesting.”