E&P Sector in Argentina Status and Outlook Buenos Aires - April 23, 2015 G&G Energy Consultants - Daniel G. Gerold Carabelas 235 Piso 7 - Buenos Aires, C1009AAA Argentina Tel.: 54.11.4326.2806 54.11.5238.2012 54.11.5238.2013…
Strong dependence on domestic oil and gas production Argentinas energy consumption biased towards hydrocarbons - 87.1% of overall consumption Natural Gas 52.7%, even under large shortages of supply Economic growth and energy…
Economic stagnation with high inflation entering into third consecutive year End of the high economic growth cycle Industrial stagnation since 2010 Correlation between industrial stagnation, and impact of energy imbalance 35%…
Stagflation: lack of US lead to restrictions on imports, affecting economic activity Energy Sectors trade deficit has strong influence in reduction of overall Trade Balance Oil price slump has a marginal short-term benefit for…
Diesel oil: most consumed fuel; correlated with economic activity Imports of diesel oil decreased to 13.3% of overall supply in 2014, from a record-high 18.8% in 2013 Larger hydroelectric availability, and mild temperatures…
Gasolines: growing demand stopped in 2014 as price increases had impact Important cycle of growth in demand 2014 marked a turning point after many years of expansion, affected by a sharp increase in prices to car drivers 6
Impressive increase in demand for electricity in Q1 2015 Bad hydrology 7
Power demand propelled by Residential Decrease in Industrial demand 8
Natural gas large unsatisfied demand slightly lower due to mild winter 9
Drilling activity driven by YPF - Soar of drilling rates may stop Gas drilling
Isolation of prices in Argentina - Medanito crude price at 77 /bbl 11
PlanGas complements wellhead prices to 7.5 US/MMBTU for incremental production PlanGas price scheme provides incremental subsidy, but average realized price converges to 4.5 US/MMBTU for existing producers Not enough average if…
2013: declining oil reserves (-0.8%), expanding gas reserves (+4.0%) Higher investments dedicated to shale oil and tight gas development Initial stage at shale gas, with encouraging technical results Maturing conventional oil and…
Liquids output -1.5% in 2014; -1.8% y-o-y in February 2015 14
Natural Gas output -0.5% in 2014; +1.2% y-o-y in February 2015 15
2011 through 2013: acreage positioning: Estimated 4.0 Bn invested since 2010; 2.2 Bn in past 12 months Players assessing the Vaca Muerta play Expansion in exploration efforts 16
Declining trend in oil and gas productivity requires a change for higher prices 17
Shale play receives interest and will unfold in next years Some advances by selected companies YPF concentrated in shale oil drilling of vertical wells Companies different than YPF showing some interesting technical results with…
Output of shale play as of March 2015 All operators in Argentina 445 wells drilled/worked over since start of process 380 wells in production by March 2015 (85.4%) 316 producing wells out of 325, are located at Loma Campana…
Output of gas from shale play as of March 2015 All operators Most is associated gas to black shale oil production 391 wells in production by March 2015; Majority of wells are shale oil producing wells at Loma Campana by YPF-Chevron…
YPF - Productivity still low, requires horizontal wells and more stages of fracs Accelerated decline of wells drilled in 2013 campaign; Better performance by a group of wells drilled by YPF in past 5 months at West of Loma…
Efforts to increase productivity should drive E&P development in Argentina Positive results at several horizontal wells Noticeable improvement compared to average output from a numerous wells at east of Loma Campana 22
Some Conclusions on E&P Business Environment in Argentina Implicit recognition of wrong policies and need to increase production through incentive programs Potential increases in tariffs Expected domestic oil and gas prices to…
Is there a chance for further boost of business terms Whenever Argentina faced imports of energy products, a change took place to boost domestic oil and gas production through improved terms Expected US disbursements to import…
2015 is key for future scenarios October 2015 election will mark end of Kirchners presidency President Cristina Kirchner is not allowed by Constitution to run for a potential third term She has not yet announced the candidate she…
2015 is key for future scenarios Opposition is divided in two main candidates, Mr. Macri and Mr. Massa Latest polls suggest Mr. Macri has gained several points after receiving supports from other parties leaders, and might be…
Bad economy; perception of improvement - Optimism for new Government Confidence in Government at low level, but not at bottom There is still a 30% Support after 12 years in power Consumer Confidence recovering after impact of 2014…
Overview of candidates general characteristics Main three presidential candidates are perceived as more predictable and rational General consensus on more friendly approach to business and foreign investment Candidates have groups…
Approach to Energy Sector Todays lack of concrete plan for Energy Sector, but understanding of influence on economy and need for improvements Macri Market rules with systemic approach to solution, under a general economic plan…
Approach to Energy Sector Scioli Continuation of recent improvements by current Government, such as incentive programs Control of imports and exports Gradual increase in gas and power tariffs State role for new investments in…
Approach to Energy Sector Massa Proactive expansion of improvements to gas and oil production High probability of tax reduction through accelerated Depreciation and Amortization in oil and gas production Certain degree of control…
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