Andes Energy merges with Mercuria, together will invest $160 million USD into Vaca Muerta

Andes Energy merges with Mercuria, together will invest $160 million USD into Vaca Muerta

The company says it will have a better financial profile to access capital and operate in oil, gas and electricity. The stock grew more than 200% so far this year.

The company Andes Energía (AEN) announced yesterday its merger with Petrolera El Trébol (PETSA), the subsidiary for the exploration and production of gas in Argentina of the Swiss group Mercuria. The merger formed Phoenix Global Resources, a company whose mission will be to operate in the Neuquen formation of Vaca Muerta unconventional hydrocarbons, where it plans to invest close to $160 million USD next year.

Mercuria, a firm specializing global commodities trading, already participated with 8% of AEN and now it will keep 75.38% of the new company. At the same time, the shareholders of AEN (among them, Daniel Vila and José Luis Manzano) will hold the remaining 24.62%.

In the papers, AEN announced a conditional combination with Trefoil Holdings, a company that indirectly owns 99.99% of PETSA.

AEN and PETSA, now Phoenix Global Resources, combine reserves totaling 63 million barrels of oil equivalent (BPE) and production exceeding 11,500 barrels per day, the new firm announced. Together, the Vaca Muerta reservoir—the largest unconventional oil and gas reservoir outside the United States—has 300,000 net acres (nearly 120,000 hectares), making Phoenix Global Resources the largest acreage independent company in the area.

“In the first four-month period of 2017, PETSA made a discovery in the area of Puesto Rojas of the Vaca Muerta formation. A resource study demonstrated its potential: it contains over 400 million BPE (best estimate of recoverable resources). Vaca Muerta is currently the only profitable shale oil production training outside of North America,” the company said.

Among the greatest assets of Phoenix are, among others, the Mendoza oil fields of Chachahuén, the most important conventional oil discovery in recent years in the country, where YPF also participates; Puesto Rojas, with very high potential for shale and unconventional oil development; and Santa Cruz Sur, with significant production and reserves of gas and oil.

Nicolás Mallo Huergo, current chairman of AEN and now a non-executive director of the newly-created Phoenix, said: “We hope that this agreement will generate operational synergies and create a leading independent hydrocarbon exploration and production company with a strong focus on Vaca Muerta.”

In turn, the chairman of Phoenix Global Resources, the Michael Rake (from the United Kingdom), said in the communication to investors that he sees great potential in Argentina “as the country’s political and business climate has improved.”

AEN’s announcement also included a statement on its financial resources.

“Work program financed by a credit with an affiliate of Mercuria EG, consisting of a term loan for approximately US $ 87 million and a permanent line of credit for an amount close to $73 million USD, conditional on the completion of Transaction and Admission. The Integrated Group will have an improved financial profile with 2016 pro forma income of $181.9 million USD and 2016 pro forma EBITDA of $57.2 million USD. The current directors and proposed directors believe that the Integrated Group will be in a better position to access additional capital,” they explained.

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