Tuesday, June 7, 2016

Will Shell or Exxon buy Madalena Energy?


Exxon Mobil Corp. may invest more than $10 billion as it transplants the U.S. shale-drilling model to Argentina’s Vaca Muerta region in the next few decades, Chairman and Chief Executive Officer Rex Tillerson said Thursday.

The oil giant has so far invested $200 million in the world’s second-largest shale gas deposit and plans to invest another $250 million in coming months on a pilot project, Tillerson said after meeting with Argentine President Mauricio Macri in Buenos Aires.

Unlike the mega-projects that have been Exxon’s hallmark for more than half a century, the shale developments the company began pursuing in 2010 have involved drilling hundreds of individual wells and installing thousands of miles of pipes to squeeze crude and natural gas from deep, dense, onshore fields.

If the pilot project is successful, the company will start full development during a period of 20 to 30 years that could involve additional investment “that would be well in excess of $10 billion,” he said.


In the long term, the company said it would target shale oil and gas production in North America and Argentina as well as biofuels, hydrogen, solar and wind in a new energies unit.

Nothing really pointing to a takeout by one of the majors but we can speculate on a few things. The majors really did not participate in the shale boom in the US over the last few years. They have acquired acreage in Argentina and if the science works like in the US, and it appears it is, than Argentina could be the next big shale play. The recent elections have put a more pro business government in power which is seeking to expand the oil industry in Argentina.

Then you have little Madalena Energy which is sitting on tens of thousands of acres of potentially large shale acreage. It does not have the resources to develop it all itself so expect either a take out or a joint venture/buyin by a bigger company. The more that other companies prove up resources in the Vaca Muerta shale the more derisked Madalena Energy becomes and the more likely a deal happens.

You also have both Shell and Exxon saying they want to be players in Argentina. You can see the possible connection. 

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