Shell Weighs Exit From Argentina's Vaca Muerta Shale Assets

Shell plc SHEL is considering a potential sale of some or all of its assets in Argentina’s Vaca Muerta shale play. The company has reportedly approached potential buyers in recent weeks to assess market interest, though no final decision has been made.The assets, located in Argentina’s Neuquen basin, could be highly valued, running into billions of dollars. However, an exact valuation remains uncertain due to a mix of undeveloped acreage and fluctuating commodity prices.A Possible Exit From a High-Profile Shale PlayA full divestment would represent a surprising move, as Shell was one of the earliest international oil majors to back the Vaca Muerta formation. Interest in the region has been growing as concerns mount that other major shale basins, including the Permian in the United States, may be nearing peak production.The potential sale would also follow Shell’s recent decision to exit the Argentina LNG project after state-owned YPF Sociedad Anónima YPF reduced the project’s planned capacity. Together, these moves point to a broader reassessment of the company’s exposure to Argentina.YPF is one of the primary players in Argentina’s Vaca Muerta, which earmarked a $3.3 billion investment in the premier shale play, providing a significant boost to the Argentinian energy sector. The company intended to raise its oil production from Vaca Muerta to nearly 200,000 barrels per day by the end of 2025 and it also exports a significant portion of its production volume, boosting its earnings capability.Shell’s Footprint in ArgentinaShell entered the Vaca Muerta shale play in 2012 and has steadily expanded its presence. The company currently holds four majority-owned and operated license blocks, along with minority stakes in three additional blocks operated by YPF. According to Shell’s latest annual report, production from Argentina totaled around 15.6 million barrels in 2024.Any decision to sell would mark a major shift in Shell’s long-standing involvement in one of South America’s most promising energy regions.Portfolio Streamlining Under New LeadershipSince Wael Sawan took over as CEO in 2023, Shell has accelerated efforts to streamline its portfolio and improve performance. The company has been selling assets following the underwhelming returns from earlier bets on a rapid transition from oil to renewable energy.Recently, the company planned to exit Syria’s al-Omar oilfield and is exploring sale options for its stake in LNG Canada. A potential Vaca Muerta divestment would align with this broader strategy.Why Vaca Muerta Remains AttractiveDespite Shell’s review, Vaca Muerta continues to draw strong interest from producers seeking new growth opportunities. Only about 8% of the formation has been developed, compared with the heavily drilled Permian basin. According to U.S. government estimates, Vaca Muerta holds the world’s second-largest shale gas and fourth-largest shale oil resources.Earlier this month, Continental Resources acquired minority stakes in four Vaca Muerta blocks, calling the region one of the most compelling shale plays in the world.Cost Challenges and Competitive EconomicsThe shale play has seen rapid production growth, but several challenges remain. Declining oil prices, higher production costs and transportation bottlenecks have the potential to slow future development. According to Chevron Corporation CVX, drilling costs in Vaca Muerta are 35% higher than in the Permian basin. Even so, Shell’s assets in the region are believed to break even at Brent oil prices below $50 per barrel, making them competitive compared to many global shale plays.Chevron also maintains a steady presence in Argentina’s Vaca Muerta shale and eyes it as an increasingly vital part of its global portfolio. Chevron has played a major role in the progress of Vaca Muerta, applying its U.S. shale expertise, especially from the Permian Basin, to boost efficiency and well performance.Zacks Names #1 Semiconductor StockThis under-the-radar company specializes in semiconductor products that titans like NVIDIA don't build. It's uniquely positioned to take advantage of the next growth stage of this market. And it's just beginning to enter the spotlight, which is exactly where you want to be.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $971 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Chevron Corporation (CVX): Free Stock Analysis Report YPF Sociedad Anonima (YPF): Free Stock Analysis Report Shell PLC Unsponsored ADR (SHEL): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks