Argentina’s state oil company Yacimientos Petrolíferos Fiscales SA (YPF)  plans to spend $1.5 billion to boost oil and gas production this year in Neuquén province, home to the giant Vaca Muerta formation.

Vaca Muerta

YPF “has come out to announce its big effort to all Argentines, an investment that will translate into an important increase in oil and gas production that is going to boost growth in our country,” Chairman Pablo González said Friday.

The company is looking to increase the province’s crude production by 56% and unconventional natural gas production by 70% this year, the executive said.

YPF, like all operators in Argentina, had a difficult 2020, and saw overall production fall by 9% to 467,000 boe/d.

Capital expenditure (capex) fell last year by 56%, hitting $1.55 billion. At the onset of the coronavirus last March, activity ground to a complete halt, with zero active rigs reported in the country in April. Activity picked up gradually through the year, and by year-end YPF had more than 80 rigs in operation, including drilling, workover and pulling towers.

In its fourth quarter earnings conference call earlier this month, executives expressed enthusiasm for 2021, citing improved natural gas prices because of the government’s Plan Gas 4 tender scheme, and a better cost outlook. Listing costs fell by 19% in 2020 to $9.70/boe, executives said.

In December the national government handed out 23 contracts for 67.42 million cubic meters/day (MMm3/d), or 2.38 Bcf/d, as part of Plan Gas 4. As part of the plan, winning companies would be able to sell natural gas to the market at a combined weighted average of $3.54/MMBtu through 2024. The aim of the plan is to bolster production so that distribution and power demand can be met through domestic production.

Companies winning contracts included YPF, Tecpetrol SA and Pampa Energia SA.

In natural gas, YPF plans to invest $600 million this year and $1.5 billion in 2022-2024, when guaranteed prices through Plan Gas 4 end. The company plans to drill more than 250 natural gas wells through 2024.

The company plans to up capex by 70% this year to $2.7 billion, 80% of which would go to the upstream.

YPF reported a fourth quarter profit of $549 million ($1.41/share), compared with a loss of $140 million (minus 45 cents) in the fourth quarter of 2019. Full-year losses amounted to $1.098 billion (minus $2.76/share) in 2020 compared to a full-year loss of $688 million (minus $1.78) in 2019.