Vista Oil & Gas seals $700m Argentina deal

Vista Oil & Gas seals $700m Argentina deal

19/02 - Mexican acquisition vehicle takes control of shale explorer Pelsa

Six months after bursting on to the Mexican stock market with the third-biggest initial public offering since 2015 and the promise to become a Latin American energy champion, Vista Oil & Gas has sealed its first acquisition and is planning an aggressive 400-well drilling programme in Argentina’s Vaca Muerta shale formation.

The company, led by Miguel Galuccio, the former chief executive of Argentine state company YPF, announced it had acquired 99.7 per cent in Petrolera Entre Lomas, or Pelsa, for $700m, giving it production of 27,500 barrels of oil equivalent per day and a swath of Vaca Muerta acreage which Vista aims to bring into production next year.

“This operative platform, with a mix of cash flow-generating assets and high-growth ready-to-develop core Vaca Muerta acreage, will be the cornerstone to delivering on our vision of making Vista a leader in Latin America,” Mr Galuccio said.

The acquisition of Pelsa, previously owned jointly by Pampa Energía and Pluspetrol, vaults Vista into position as Mexico’s only listed exploration and production company and one of the top 10 oil producers in Argentina. Pelsa has been producing assets in the Neuquén basin, including one operated by Shell unit O&G Developments.

The company is expected to post 2017 earnings before interest, tax, depreciation and amortisation of $182m. Vista, which is backed by Mr Galuccio and energy-focused private equity firm Riverstone, raised $650m in a Mexican IPO last August when it was launched as a special purpose acquisition company.

Vista agreed to buy Pampa’s 59 per cent stake in Pelsa in January and in the past month it has raised an additional $400m in debt and equity, including a $300m credit line from Citi, Morgan Stanley and Credit Suisse, to allow it to assume full control. US, UK and Canadian funds, as well as Mexican pension funds, have participated in fundraising, Vista said.

The company is planning to use $100m to invest in and develop assets. “We expect to drill the first wells in Vaca Muerta in the second half of 2018 and to start production in early 2019,” Mr Galuccio told the Financial Times. “Vaca Muerta represents a massive opportunity for the entire region and, in particular, for Argentina.

The play has been de-risked and is now ready for economic development,” he said. Vaca Muerta contains the world’s second-largest shale gas reserves but the acreage Vista has bought is largely shale oil. “On the personal side, Vista and this acquisition represent for me the opportunity to focus again on the development of Vaca Muerta.

That was just a promise when I came back to Argentina to lead YPF six years ago.

Vaca Muerta is now a reality on which many majors are focusing their investments and Vista provides investors a unique opportunity to get direct exposure to it,” Mr Galuccio said. YPF itself last year announced a $30bn five-year shale push designed to ramp up Vaca Muerta’s production to emulate the US shale boom. Vista includes other senior former YPF executives including Juan Garoby, the former head of unconventionals.

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