Integrated oil and gas company TOTAL S.A. (TOT) has acquired interests in four more exploration licenses in Argentina to appraise its shale gas potential.
As part of the deal, TOTAL, in partnership with Buenos Aires-based YPF S.A. (YPF), acquired interests in the Aguada de Castro license (42.5% interest, Operator – TOTAL), Pampa las Yeguas II license (42.5% interest, Operator – TOTAL), Cerro Las Minas license (40% interest, Operator – YPF) and the Cerro Partido license (45% interest, Operator – YPF).
These new licenses are located in the Neuquen Basin, a triangular-shaped area on the eastern side of the Andes in Argentina and central Chile. The licenses were awarded by provincial authorities for a six-year period. TOTAL’s main assets in the Neuquen Basin are the Aguada Pichana and San Roque, which account for nearly 56% of its production in Argentina.
TOTAL in Argentina enjoys a significant holding in shale gas play. The company, through its subsidiary Total Austral, operates 28% of Argentina’s gas production.
The four new blocks are the latest addition to TOTAL’s portfolio of assets in Argentina. Management believes these new additions, which are potentially rich in shale gas, further strengthens TOTAL’s presence in unconventional gas domain. Earlier in 2010, the company had acquired an 85% stake in the La Escalonada and Rincon La Ceniza blocks in the same shale gas play. Looking at TOTAL’s goals, we understand that the company is ambitious about growing its potential in the shale gas domain.
Currently, TOTAL is conducting geological and seismic studies in the area and plans to drill exploration wells in 2011 to evaluate the play’s production potential. In 2010, the company carried out similar studies on two other long-held blocks that it operates: Aguada Pichana (27.3%) and San Roque (24.7%).
France-based TOTAL S.A. is among the top five publicly traded global integrated oil and gas companies based on production volumes, proved reserves, and market capitalization. It operates in more than 130 countries across five continents with approximately 96,000 employees.
TOTAL S.A. currently retains a Zacks #3 Rank (short-term Hold rating). We maintain our long-term Neutral rating on the stock.
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