by Travis Johnson, Stock Gumshoe | September 26, 2013 10:20 am
This is premium content. To view this article (and to have full access to the rest of our articles), sign up. Already a member? Log in.
Source URL: https://www.stockgumshoe.com/2013/09/speculative-buy-on-argentine-gas/
Copyright ©2024 Stock Gumshoe unless otherwise noted.
I am Argentine. I just got back from Buenos Aires. I travel often and I believe I understand the big picture concerning Vaca Muerta. Argentina has an enormous energy deficit. It is importing gas and oil at an increasingly alarming rate. This energy deficit is the main source for US dollar drain. The government imposed a defacto ban on buying US currency because it needs to get hold of every dollar it can in order to pay for these energy shipments. These dollars are becoming harder and harder to get as energy shipments grow larger every year. That is why the current government has also put in place import controls: so as to avoid having to pay US dollars abroad. Furthermore, the government will not reveal the content of it’s recent agreement with Chevron for the exploitation of Vaca Muerta. Terms and conditions of this agreement are probably not the best for Argentina, specially for a government that prides itself on an anti-gringo capitalist image. It is also interesting to note that the Argentine government entered this agreement with Chevron at the expense of its alliance with Ecuador’s president Rafael Correa. As many know, Chevron is in the middle of a law suit for environmental damage in Ecuador’s amazon. Ecuador requested Argentine courts put an embargo on Chevron’s holdings in Argentina. Argentine courts followed through but later the decision was reversed. In short: the truth of the matter is that the current regime is desperate for cash and will do whatever it takes to get Vaca Muerta of the ground since they are currently feeding on dwindling central bank reserves.
Thanks Gonzalo, excellent perspective.
YES, Thank You Gonzalo. Highly informative. Guessing that importing Energy costs are a big part of the reason Argentine Currency virtually collapsed a little over a decade ago. Big need in Argentina, though it will require a lot of Capital that Argentina does not necessarily have, is Nuclear Power.
Feel for Argentinians who, like a whole lot of Americans these days, do not understand what causes prosperity (Savings and Investment and Savings, for most of us, means Sacrifice (doing without things we would otherwise like to have and even consider to be necessary; cost cutting, cutting, cutting)).
As say: much appreciate your informative writing here Gonzalo.
I also invested in Madalena Energy {MVN.V}. It is located near Vaca Muerta and holds 35000 net acres on its Coirn Amargo Block. GLTA who have bought in Argentina. Thanks to Travis. I found about Argentina on his Gumshoe site.
As a value investor Travis, I wonder if you would dare take a look at some Argentine ADRs. The valuations of some of these have been low not because the companies are unsound but because of the political factor. However, there is money to be made as some of these are starting to wake up. If the October 27th congressional elections ratify first round results from August in which president Cristina Kirchner took a beating, then the current government is on the way out in 2015.
Yes. I will never buy stock in Political left wing in Argentina. You will never know when they nationalize the company. There are many good company in USA that I could easy to sleep at night.
coincidentally, new reserves data released on their conventional assets today (not the Vaca Muerta stuff) — here’s an excerpt:
“As a result of this updated reserves evaluation of Medanito Sur block, the Company-wide conventional proved plus probable before-tax net present value (discounted at 10%) is US$243.8 million at June 30, 2013”
So … NPV at a 10% discount rate values their conventional p&p reserves at roughly their market cap. So the oversimplification is that either it’s a massive Argentine discount (which may well be warranted) or we get the potential value of Vaca Muerta “for free”.
There is an excellent newsletter in Germany since about 2 years, which is called “company maker” (from Ulli Pfauntsch). The main focus is on “undiscovered” oil & gas companies. Top recommendation was (and is) Africa Oil in Jannuary 2012!!!. Madalena Ventures & Americas Petrogas were covered nearby since the beginning of the newsletter on the recom list and there are often updates and analysis to theses companies in the weekly letter!
Hi Tarvis, do you have any updates on Americas Petrogas? I am still holding. Wish I sold a little on the spike to $1.75.
Nope, I speculated that their “shop the company” might lead to a premium buyout — it hasn’t yet, and may not, but I’m waiting for a catalyst one way or the other. It’s probably bad news that there’s no chatter about a buyout yet, but that’s just a guess.