Many eyes are on Argentina this year. In October, the country will put an end to 12 years of one-family rule, latterly overseen by the increasingly unpopular and health-troubled Cristina Fernández de Kirchner, who took over from her husband and presidential predecessor Néstor in 2007.
Election polls are currently tilting towards Daniel Scioli, president of the Justicialist Party and the current governor of Buenos Aires. Sergio Massa and Mauricio Macri, of the Renewal Front and the Republican Proposal parties respectively, are also in contention. But whoever wins, many expect the next candidate to be less populist and reflexive, more business-friendly and eager to repair the country's image as a litigation-embroiled pariah of capital markets, unsafe for foreign investment.
Such a change would further explain why Argentina has attracted so much attention from natural resources companies and their investors. Long home to a developed oil industry, the majors have been closely watching developments in the Neuquén Basin, where some - including Chevron - have claimed that the region's enormous Vaca Muerta shale formation could gift Argentina energy independence.
The Vaca Muerta (literally, 'dead cow') is the only oil-producing shale outside the US, and - depending on who you ask - the second or third largest shale resource anywhere. The US Department of Energy estimates that the shale contains as much as 27bn barrels of oil and 800 trillion cubic feet of gas, and a recent Goldman Sachs report compared the resource potential with the Bakken formation either side of the US-Canada border. Past oil production has left a solid infrastructure legacy, and land currently fetches up to $10,000 an acre. As you might expect, this has led to a gold rush in the past two years, and explains the presence of Shell (RSDA), Total (Fr: FP), Petrobras (Bra: PETR4), ExxonMobil (US: XOM) and Chevron (US: CVX) in the region. Last month, Russian behemoth Gazprom (Ru: GAZP) signed a deal to develop shale and oil and gas assets in the region with state-owned YPF (US: YPF), which by default has the largest acreage of any major. One of the lesser-known names in Vaca Muerta is Andes Energia (AEN), a company jointly listed on Aim and the Buenos Aires stock exchange and headed by Repsol's former business development director, Alejandro Jotayan. It is touted as London's only 'pure-play' on the shale, and although it has a market capitalisation of £172m, it boasts more than 500m barrels of certified resources, and 6.2m net acres in Argentina - including 250,000 in the Vaca Muerta, over 90 per cent of which is in the proven oil window. This, management says, gives Andes the largest acreage position in the shale of any independent company, although four of its six licences are still shared with YPF.
I think that this chart looks very strong and that we are moving/breaking out of a downwards channel which started with the peak of 70p on 10.2.14, a bit of time will be needed and positive developments in Argentina plus oil price. All in all my personal opinion is that the movement back up has started, but time will tell.
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