Deals - Joint Ventures | Top Story | Capital Markets | Private Equity Activity

American Energy Partners In Vaca Muerta JV With YPF; $500MM

Share Print Bookmark    |    Friday,January 15,2016

The CEO of American Energy Partners LP, Aubrey K. McClendon, and the President and CEO of YPF, Miguel Galuccio, signed initial agreements for the exploration and development of the Vaca Muerta formation in the Neuquén Basin in the Province of Neuquén in Argentina.

See also: Vaca Muerta 2016: $16 Billion and 1,600 Wells

The CEOs jointly visited Mr. Juan José Aranguren, Argentina´s Minister of Energy, to present details of the shale oil and gas projects that both companies plan to execute, which entail investments of more than US$500 million over the next three years, and to introduce AELP, which brings its extensive experience with US shale basins.

One project consists of launching a shale oil and gas development pilot in the Bajada de Añelo block, covering approximately 200 km2 (55,500 acres). After this first stage is completed by mid-2018, the project would enter into the full field development phase in “U.S. style shale manufacturing” mode. In addition, YPF and an affiliate of AELP, in partnership with Pluspetrol and Gas y Petróleo de Neuquén, will launch a second project to delineate shale gas resources in the southern portion of the Cerro Arena block, covering approximately 375 km2 (92,600 acres).

Under these agreements, an affiliate of AELP would earn up to 50% participating interest in the blocks. Thus, YPF incorporates a new strategic partner to accelerate the development of the Vaca Muerta shale led by a team with proven top-tier operating capabilities and industry-leading experience in the development of unconventional formations. AELP, an oil and gas asset management platform and operator with a management team that has drilled more than 15,000 horizontal shale wells throughout the US, is led by former Chesapeake Energy Corporation co-founder and CEO McClendon. Under McClendon’s tenure, Chesapeake grew from a start-up in 1989 to the largest gas producer and driller of new wells in the U.S. in less than 20 years, increasing in total enterprise value to over US$30 billion at the time of his departure in 2013.

Galuccio commented: "YPF is welcoming a partner that will contribute expertise of the highest level to develop shale oil and gas in our country. We believe that this partnership will be very enriching for our company by allowing YPF to accelerate the learning curve."  

McClendon added: "We are thrilled and very honored with the opportunity to partner with YPF in Argentina to further develop the Vaca Muerta shale formation, a world-class unconventional play with tremendous potential. Through our partnership with YPF, we intend to bring US style shale drilling and operating expertise, completion techniques and cost structure to the Vaca Muerta, which we believe will prove transformative for the play."

The agreements were signed this afternoon by McClendon and Galuccio at YPF’s headquarters in Buenos Aires. During the next three months, the companies will negotiate the definitive agreements with the purpose of initiating joint operations in Bajada de Añelo and Cerro Arena Sur during 2016.

YPF and its partners have invested over US$3 billion to develop unconventional oil and gas in the country, positioning YPF as the leading unconventional producer in Argentina and most relevant unconventional player outside North America. 

AELP will join the development of Argentina´s vast shale resources alongside Chevron, Dow and Petronas, which already have ongoing shale projects targeting Vaca Muerta.