From Bloomberg

YPF SA is counting on the Vaca Muerta shale formation to produce more than half its oil and gas by 2022, as part of a plan to invest more than $20 billion in five years.

The Argentine state-run producer expects shale oil and gas output to soar by 150 percent over the next half decade, spurring an overall production rise of 25 percent, according to a five-year plan it filed Wednesday to the stock exchange. Currently, only 21 percent of its 550,100 barrels a day of production are from so-called unconventional wells.

YPF was the only stock to rise on the Buenos Aires Merval Index, gaining as much as 2.4 percent. The company’s target price was also raised to $26 per American depository receipt from $23 by TPCG Valores SA on the shale push.

So far, the giant shale formation in Patagonia has failed to live up to expectations of a fast development. Since the first wells were drilled in Vaca Muerta about five years ago, high costs, scarce transportation infrastructure and the collapse of crude prices have slowed progress. But the cost per well has been dropping every year.

By 2022, the company will reach a development cost of $10 per barrel in Loma Campana, the flagship shale oil field it operates with Chevron Corp., down from $13.40 now, according to the plan. YPF executives had previously expected to reach the $10 goal by the end of next year.

The drive to develop Vaca Muerta — including plans to build a network of pipelines and plants to cope with higher shale gas production spurred bygovernment subsidies — will be a big part of $30 billion of investments led by YPF over the next five years. Of that, $21.5 billion will come from YPF and the rest from partners such as Chevron and Petroliam Nasional Bhd, among others.

YPF believes it can boost output while cutting operating costs by 20 percent. Its overall capital expenditure will be $4 billion to $4.5 billion annually, with about $3.4 billion a year going to upstream, down from $3.9 billion currently.

Power Leader

Another pillar of YPF’s strategy is to become a leader in power generation in Argentina, with the company forecasting $2 billion of investment to more than double capacity, from 1,340 megawatts currently. YPF currently supplies 4 percent of Argentina’s power.

That expansion comes as President Mauricio Macri ends more than a decade of subsidized electricity consumption under his predecessors, during which frozen prices for customers and soaring inflation saddled companies with losses. YPF is in advanced talks to get a partner on board for its electricity unit, YPF Energia Electrica SA. It may get as much as $1 billion by selling as much as 49 percent of the unit.

YPF also said it wants its finances to be solid by keeping its debt ratios low. It’s aiming for net debt of 1.5 to 2 times earnings before interest, taxes, depreciation and amortization, or Ebitda. The current ratio is about 2, Chief Financial Officer Daniel Gonzalez said in an Aug. 9 conference call with investors. The industry average is 2.1.

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