Vintage's 04 Argentine Gas Output Slips on Operating Problem
US oil company Vintage Petroleum (NYSE: VPI) saw its Argentine gas production fall 11.2% to 8.7 billion cubic feet (Bft3) in 2004 mainly due to a labor strike and problems at a major oil loading facility, the company said in its year-end earnings statement.
Operating problems reduced gas output in Argentina by 429 million cubic feet (Mft3) for the year ended December 31, 2004. Gas production fell 17.5% in the fourth quarter alone to 2.18 Bft3 compared to 4Q03.
However, Bolivia continued to benefit from Argentina's increased demand for natural gas, with the company's net gas production in Bolivia rising 30.6% to 8.1Bft3 in 2004 from 2003. Bolivia gas production increased to an average 22.6 Mft3 in 4Q04, up 18.3% compared to the same period in 2003, the statement said.
Argentina's average gas price increased 45.7% to US$0.67 per thousand cubic feet in 2004, while the average Bolivian gas price fell 14.9% to US$1.71/thousand cubic feet.
Argentine oil production fell 4.7% to 9.9 million barrels (Mb) in 2004 down from 10.4Mb in 2003 due to the 527,000b negative impact of operating problems on production. Oil production in Bolivia increased 7.2% to 89,000b, the statement said.
The average price for Argentine oil in 2004 was up 21.4% to US$31.74/b, while the price of Bolivian oil remained flat. Despite operating problems, Vintage's Q4 oil production in Argentina averaged 31,396b/d, up 9% from 4Q03. Over half that increase came from Vintage's purchase last September of Canadian oil company Rio Alto Resources' local subsidiary Petrolera Río Alto, which owns and operates the 54,000 acre Bella Vista Oeste production block in the northern part of the San Jorge basin.
Vintage attributes the remainder of the increase in oil production to its drilling program and workover programs, the statement said.
Due to weather delays in the last week of December the company experienced a 441,000b increase in its Argentine oil inventories, the statement said. However, this inventory change is anticipated to be temporary since these volumes should be sold in 1Q05.
Export taxes in Argentina increased to $17.4mn in 4Q04 from $5.2mn in 4Q03 due to higher oil export taxes announced last August, the statement said. "That export tax is scheduled to expire in about two years so only if a producing well becomes uneconomic in the next couple of years would that tax have any impact on reserves," COO Bill Abernathy said in a conference call.
Vintage anticipates paying lower export taxes in Argentina this year as it will be selling more oil on the domestic market, Abernathy said.
In 2005, Vintage expects to produce 12.3Mb of oil and 8bcf of gas in Argentina, while oil production in Bolivia is earmarked at 0.1mb and gas at 4.5bcf of gas. The company's gas production in Bolivia should drop this year because the company "sold additional gas to the domestic market [in 2004] for back-filling as some other producers were sending gas into Argentina," CEO Charles Stephenson said in the conference call.
This year's forecast corresponds to Vintage's estimated sales but it is difficult to predict back-filling figures, Stephenson added. Of the US$178mn that Vintage will invest in its 2005 exploration and production program, US$113mn will go to Argentina. "We have our highest level of activity ever there," Abernathy said.
Currently the company has five rigs drilling in the San Jorge basin and is planning to shoot 3-D seismic there this year, he added. Globally, Vintage posted US$249mn net income in Q4 compared to a US$285mn loss in 4Q03. The company's overall 2004 net income was US$333mn compared with losses of US$241mn in 2003.
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