Vaca Muerta shale to double production by 2018, Wood Mac says

11/24/2015

HOUSTON -- Production from Latin America's premier shale play, the Vaca Muerta, is expected to double by 2018, according to a new development study by Wood Mackenzie. Argentina's massive play continues to be the most prospective tight oil play outside of North America.

While a marked ramp-up can be expected by 2020, the study highlights that oil and gas output in 2016 should be moderate with year-over-year production at 10%.

Wood Mackenzie expects horizontal wells to become the development of choice as operators are increasingly able to target the most productive intervals of the Vaca Muerta.

"YPF and its JV partners continue to decrease drilling and completion costs aiming to move into ramp-up and development phases," Horacio Cuenca, Wood Mackenzie's research director for Latin America, said.

In the Loma Campana Block, the average horizontal IP30 rate is currently around 646 boed, up from 443 boed in 2014.  To compare, in the Karnes Trough of Texas’ Eagle Ford shale, the first hundred wells had an IP30 rate of 420 boed, while the average rate today is more than double.

Cuenca adds that more JV deals will be necessary to fully develop the Vaca Muerta as YPF will need outside assistance to develop the 6.3 million acres (larger than the state of Maryland) it holds.

The following are other key considerations from Wood Mackenzie's development study:

  • In 2016, Wood Mac estimates total capex at $1.2 billion as companies prepare for full development.
  • The heavy impact of unions on labor costs and political uncertainty remain the largest impediments to international investment. Wood Mac expects 200 wells to be brought online in 2015, and fewer in 2016 as vertical wells are phased down. Currently, there are approximately 460 producing wells.
  • The condensate window, including the Loma Campana Block, drives value. Wood Mac estimates a total remaining NPV10 of $9.7 billion for the Vaca Muerta.

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