* CEO says access to drilling equipment difficult, costly
* Pilot plan envisions drilling 132 Vaca Muerta wells
* Posts sharply higher quarterly profit
By Karina Grazina
BUENOS AIRES, March 11 Argentina's
state-controlled energy company YPF said on
Monday the high-cost of equipment could force it to scale back
an ambitious drilling program this year at the country's vast
shale oil deposits.
YPF, which was renationalized last year as Argentina battles
to reverse a long decline in natural gas and oil output, aims to
drill 132 oil wells at the Vaca Muerta shale formation in
Patagonia this year, part of a plan to fund development of the
project from cash flow.
YPF Chief Executive Miguel Galuccio said the company would
adjust the project's pilot plan, which has an estimated
investment of $1.36 billion, if it was unable to secure the
equipment and staff it needs at the right price.
"How much of the plan we will carry out, whether we drill
80, 90 or 120 wells, I couldn't say today," Galuccio told
reporters after the company's quarterly results.
"I wouldn't rule out that 2013 is going to be a painful year
for us from the point of view of getting hold of equipment, from
the point of view of getting the people ... but when you're
growing it's a pain that you willingly tolerate," he said.
Vaca Muerta -- which means dead cow in Spanish -- has caught
the attention of international investors because it holds one of
the world's biggest deposits of shale resources, with an
estimated 23 billion barrels of oil equivalent. YPF has
concessions on 40 percent of the site.
YPF earlier reported a fourth-quarter net of 1.019 billion
pesos ($207 million), up 91 percent on a year earlier and far
ahead of market expectations, buoyed by higher domestic crude
prices and a one-off gain related to the back payment of state
oil exploration incentives. Revenue rose 26.5 percent in the
final three months of the year.
YPF is trying to ink a partnership deal with Chevron Corp
to develop Vaca Muerta, but negotiations are moving
slowly due to a court freeze on the U.S. company's assets in
Argentina over a pollution case in Ecuador.
Large amounts of capital will be needed to bring Vaca
Muerta's energy riches into production and the country remains
virtually shut out of international debt markets a decade after
staging the biggest sovereign default in history.
Galuccio has said previously it will require private
investment of some $4.5 billion to finance part of the $32.6
billion needed to meet targets to boost production.
YPF aims to boost oil and natural gas production 32 percent
by the end of 2017, reversing years of declining output in the
Despite the strong quarterly profit, YPF said its net profit
for the year fell 12.2 percent to 3.902 billion pesos ($793
million). It cited losses by companies in which it holds a stake
and the impact of new accounting regulations.
Galuccio said YPF planned to increase investment by 60
percent this year from 2012's 16.49 billion pesos.
Costs should meet expectations as long as there are no more
pay negotiations, he said. Double-digit inflation is causing
company costs to soar in Latin America's No. 3 economy.
President Cristina Fernandez seized control of YPF last May
by expropriating a 51 percent controlling stake from Spain's
Repsol, which she accused of slacking on investment to