4 Min Read
* 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 (Reuters) - 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 energy-hungry country.
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 sustain production.