Using Aleph to build cash flow models – the example of Vaca Muerta, Argentina

The Vaca Muerta formation – background and context

Argentina holds the second largest shale gas reserves in the world. The Vaca Muerta formation, in the Neuquén Basin, is one of its main producing areas and its largest play of dry, wet, and associated shale gas resources.

Figure 1. The Vaca Muerta formation.

Figure 1. The Vaca Muerta formation. Taken from the SEC.

In July 2013, the Argentine energy company Yacimientos Petrolíferos Fiscales and Chevron announced a partnership for drilling in one of the five development blocks in Vaca Muerta, which included the Loma La Lata Norte and Loma Campana fields. At that time, the Loma Campana field was already producing more than 10,000 barrels of oil-equivalent per day. In 2014, the project was extended for 35 years. With an unusually high reliance on oil and natural gas, and the weight of years of economic mismanagement, this agreement doubtlessly plays a major role in the Argentinian economy.

At the same time, the project has raised several inquiries about its environmental viability, the lax extension of the concession, its violation of Mapuche territory and tax exemptions that reduce the percentage of revenues for the government. Adding to this, a ruling from 2014 has made impossible to request information about the secret clauses of this agreement, which could help clarify who is profiting out of this project.

Yet, there has been a series of orders for disclosure from various Argentinian courts to YPF, especially after November 2015, when the Argentinian’s highest court (finally) found that operations in this field were of public interest. To all orders, YPF has appealed, claiming this would affect ‘its interests and those of its shareholders’.

How public domain information can help out

But we know there is enough information in the public space to help clarify many of these issues, like who profits from this project and to which extent. Following this philosophy, we have recently established a collaboration for developing a model of the cashflows of YPF in the Loma Campana field with partners in Argentina – Observatorio Petrolero Sur (OpSur) and Andres Knobel, Consultant at Tax Justice Network – within the scope of our Financial Modeling Program.

When modeling the cashflows of a project, however, we require data on production, costs, reserves and prices. OpSur had already gathered partnership agreements and YPF Quarterly reports, from which we have figures for production, reserves and operating costs. But we still needed to update the data on reserves and find figures for exploration, development and transportation costs.

Finding information with Aleph

This is where the OpenOil search engine, Aleph, comes into play. We use it to search through corporate filings of publicly listed extractive companies so that we can find the missing data.

Figure 2. Aleph, a tool developed by OpenOil for searching through corporate filings of publicly listed extractive companies across multiple jurisdictions.

Figure 2. Aleph, a tool developed by OpenOil for searching through corporate filings of publicly listed extractive companies across multiple jurisdictions.

Let’s start by searching for “loma campana gas reserves” in Aleph. This throws a list of 17 documents spanning years 2012 to 2016.

Clicking on the most recent document, a 20-F form, shows a preview of it. And the pages containing relevant information are highlighted and sorted by either filing data or relevance to our query.

In the top right search bar of this page, we can make internal searches in the document. So we look for “gas”:

Voilà! Here are the figures for all types (PDP, PDNP, PUD and TR) gas reserves for the project, as of December 2015.

Next, we want to find data on the different categories of cost. This, however, proved more challenging and led to some unexpected interesting findings.

Figures on costs are often listed in financial reports. But a first search of “loma campana
financial report
” leads to only two documents of 2013 and 2014. We want to find better information, so we make another general search for “loma campana capital expenditure”, a term that is more specific to what we want to look up. This search throws up 7 documents, from 2013 to 2016.

This time we go to the second document listed, a 6-K Form, given that the first contains text in a format difficult to read. In this, there is only one mention of our search term, but we are lucky: it contains information on development costs.

Even more interesting is that it also mentions the participation of another company, Compañía de Hidrocarburo No Convencional S.R.L. (“CHNC”), in 50% of the exploitation of Loma Campana. And it also mentions gas and oil purchases of YPF to CHNC in years 2013, 2014 and 2015, and net balances for the same period. A general search in Aleph for “loma campana chnc” lists 13 documents we could review in the future.

For now, we continue with an internal search of term “loma campana” within this document. We find three pages mentioning it. Going to the first mentioning, we find more unexpected but relevant information on royalties and development costs.

With this data – although still patchy and incomplete – we are much closer to being able to model the cashflows of the project, but that’s for another post. In the meantime, however, we would like to continue being informed on more data coming into Aleph. So we simply go to the top right of the page and add a weekly alert. This way, we will receive emails every time a document with new mentions of our search term is added to Aleph, and with reminders of our search.

Search for figures on reserves using Aleph.

Figure 3. Search for figures on reserves using Aleph.

Hopefully by now you are now convinced of using Aleph for finding relevant information on the extractive industries. Our experts in Open Oil will be glad to give you advice on how to incorporate Aleph to your work.

Category: Blogs, Uncategorized · Tags:

Comments are closed.