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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: Dennis Roth who wrote (156936)	11/8/2011 10:00:40 AM
From: Dennis Roth	2 Recommendations Read Replies (2) \| Respond to of 206097

YPF Sociedad Anonima (YPF) One billion is big, and it can get bigger 8 pages, 4 exhibits Download Link: sendspace.com One billion barrels is big, and it can get bigger. This can be significant for YPF shares that have been reflecting Argentina macro concerns and failing to capture any value for unconventional resources. Back in May, YPF announced a 150mmboe unconventional resource estimate for the northern part of Loma La Lata. Yesterday the company increased that number significantly to 927mmboe, of which 741mmbbls are oil. And there is more: two additional wells drilled outside Loma La Lata allowed YPF to expand the potential production area by another 306km2, almost doubling the 428km2 where the 927mmboe are located. We continue to play the ‘micro’ investment case in YPF (price improvements, shale), believing there is relatively low probability of the dividend being at risk on the macro level. Watching price dynamics. Another implication of the increased resource base is that pricing dynamics become even more important. We think increasing resources could urge the need for the government to incentivise oil and gas players to invest via enabling higher prices domestically, or easing export taxes. Another option for YPF would be to increase integration further via substituting c.20mmbbls of third-party oil purchases every year with its own unconventional production. More can come, with remaining 10 wells until year end that will give YPF’s E&P department further understanding of the play, and allow the company to come up with more detailed exploration/development plans for next year. Repsol and YPF are also hosting an investor trip to Argentina end November. How much is a barrel of Argentinean shale oil worth? This is a valid question as most $/acreage metrics do not illustrate well the upside when resource numbers are going up. Trying to incorporate uncertainties about Argentina shale economics, we take a 50% discount to our U.S E&P team average estimate of Eagle Ford – Bakken $8.4/bbl. The resulting $4.2/bbl would value the 741mmbbls at $3.1bn or $7.9/ADR. We could get to further $1.9/ADR including the 306km2 in La Amarga Chica at an average $10,000/acre. Companies Mentioned (Price as of 07 Nov 11) Baker Hughes Inc. (BHI, $56.80, OUTPERFORM, TP $80.00) Helmerich & Payne, Inc. (HP, $54.92, NEUTRAL, TP $69.00) Repsol YPF SA (REP.MC, Eu20.91, OUTPERFORM, TP Eu26.50) YPF Sociedad Anonima (YPF, $31.72, OUTPERFORM [V], TP $50.00)