Wood Mackenzie expects horizontal wells to become the development of choice, as operators are increasingly able to target the most productive intervals of the Vaca Muerta.

“YPF and its JV partners continue to decrease drilling and completion costs aiming to move into ramp-up and development phases,” says Horacio Cuenca, Research Director for Latin America at Wood Mackenzie based in Rio de Janeiro.

In the Loma Campana block the average horizontal IP30 rate currently the average is around 646 barrels of oil equivalent per day (boe/d), up from 443 boe/d in 2014.  To compare, in the Karnes Trough of Texas’ Eagle Ford Shale, the first hundred wells had an IP30 rate of 420 boe/d, while the average rate today is more than double.

Cuenca adds that more joint venture deals will be necessary to fully develop the Vaca Muerta as YPF will need outside assistance to develop the 6.3 million acres (larger than the state of Maryland) it holds.

The following are other key considerations from Wood Mackenzie’s development study:

• In 2016, we estimate total capex at US$1.2 billion as companies prepare for full development.
• The heavy impact of unions on labor costs and political uncertainty remain the largest impediments to international investment. We expect 200 wells to be brought online in 2015, and fewer in 2016 as vertical wells are phased down. Currently there are approximately 460 producing wells.
• The condensate window, including the Loma Campana block, drives value. We estimate a total remaining NPV10 of US$9.7 billion for the Vaca Muerta.