World Shale Gas Argentina Pluspetrol Unconventional Projects Javier Iguacel VP Business Development August 2014 1 PLUSPETROL IS A PRIVATE E&P COMPANY, FOCUSED MAINLY ON LATIN AMERICA AND AFRICA Locations 2013 Key Figures Operated Oil & Gas Production 537 Mboed Net Oil & Gas Production 158 Mboed Total Proven Net Reserves Oil Gas 30% 70% 886 MMboe Strategic Partners Production History (Mboe/d) 600 500 400 Oil 537 Gas 300 200 100 0 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 2 First Vaca Muerta Horizontal Well Completed by Pluspetrol 3 Agenda 1. Unconventional reservoirs impact in the US 2. Pluspetrol’s project 3. Massive Development in Argentina 4 US unconventional activity is a game changer, with impact in several areas US Natural Gas Production 80 (Bcf/D) 70 US Crude Oil Production 15 Shale Shale Oil (MMBBL/D) Tight 60 Conventional Conventional 39% 50 40 21% 30 25,6 Bcf/D 10 14,3 Bcf/D 28% 3,5 MMBBL/D 72% 8,9 MMBBL/D 5 20 40% 10 26,3 Bcf/D 0 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Fiscal 1,3% of Revenues 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Investments Employment Energy Deficit Acreage Value 1% of GDP 2% of Labor Force 17% of consumption 30% (5.098) Eagle Ford, based on transactions 172.541 87.302 17% (2.689) 3,0 108 0 Bln USD 2005 2012 2020 0 2005 2012 2020 Bln USD 0,0 2005 M/People 2012 2020 8.500 6% (1.106) 1,7 60 19.500 USD/Acre MMBoe 2005 2012 2020 2010 2014 Argentina is the 2nd shale producer with 22.000 boe/d from 240 wells Source: EIA, IHS, Giga. 5 Agenda 1. Unconvetnional reservoirs impact in the US 2. Pluspetrol’s project 3. Massive Development in Argentina 6 In June 2011 an Unconventional Reservoirs group was formed. Goals were defined. June 2011 Jan 2011 Start Point Jan 2012 Jan 2013 Jan 2014 Pluspetrol Unconventional Business Team Vision: By developing unconventional resources we aim to take the company to the next growth level maximizing Company's equity Objective To develop unconventional reservoirs to contribute to achieve a desired growth goal set by the company Short Term Focus: Our Acreage: Understand and estimate the amount of unconventional resources available Understand what technical development, operation optimization, economics and market conditions are needed to convert this resources into reserves Other Acreage: Identify and acquire/participate in high potential unconventional blocks 7 A five phase exploration plan was designed Phase 0 Regional Screening Phase 1 Phase 2 Phase 3 Phase 4 Acreage Pre-seleciton Drilling of vertical wells & sweet-spot identification Drilling of productivity pilot Early production pilot Full commercial development Description • Select focus areas • Obtain “big picture” • Detailed research • Acquire data with little investment • Drill vertical pilot • Drill production to characterize and pilot, vertical or obtain information horizontal • Start operational • Drill additional optimization verticals if needed • Develop early • Roll out the pilot production scheme • Scale production • Optimize drilling, completion and facilities Objective • Identify sweetspots • Identify locations for vertical pilots • Identify location for early production pilot • Obtain all necessary information to start commercial development Currently here • Understand how and how much to produce Working plan was executed during 2011 and 2012. Wells were tested during 2013. Jan 2011 June 2011 Jul 2012 to Jan 2013 (Start Point) Jan 2012 Vertical Drilling Jan 2013 Jan 2014 Drilling wells Regional Map • 8 wells with Vaca Muerta as primary objective • 3 wells with VM as secondary objective • 7 Tight Gas wells to Los Molles in Centenario and Zapala • 1 Horizontal well in Puesto Silva (Starts testing in Sep 14) Puesto Silva Horiozntal Well Microseismic mapping L. Jarillosa 3 wells P. Silva 3 wells Monitor well Zapala 1 Tight Gas well A. Baguales 1 explo well Cinco Saltos 2 explo well Horizontal well Centenario 2 wells VM + 6 Tight gas 9 TIGHT GAS: Visualized Business Case Objective 1A - Understand and estimate the amount of unconventional resources remaining Jan 2011 June 2011 Jul 2012 to Jan 2013 (Start Point) Jan 2012 Drilling Feb 2013 Jan 2013 Jan 2014 Completion days improvement Map showing potential locations Central Norte 35 wells Noreste 10 wells Days 40 MOLLES (Only Tight) 29 Sudeste I 16 Wells 1st Frac/d +200% 0.5 MOLLES + LAJAS 1st Sudoeste 5 Wells Infill 14 Wells 2nd -38% 28 20 21 18 3rd 4th 5th 6th 1.5 1 1 3rd 4th 1.3 0.5 2nd 5th 6th 1st stage gas project in Centenario 45 wells development Source: Internal Presentation Feb 2013 10 SHALE OIL Objective 1A - Understand and estimate the amount of unconventional resources available Jan 2011 June 2011 Jul 2012 to Jan 2013 (Start Point) Jan 2012 Drilling Nov 2013 Testing Jan 2013 Jan 2014 Regional Map Findings 1) Proved acreage Horizontal wells: 320 Proved acreage (25,000 acres) Technically Recoverable Reserves: 160 MMstb 2) Vaca Muerta is a world class shale with similar productivities than Eagle Ford. 1400 1200 P10 Vaca Muerta well type (1) 1000 800 P50 600 400 2000 m Horizontal length well type based on vertical well data Eagle Ford well type (2) P90 200 0 1 2 3 4 5 6 7 8 9 10 11 12 Month Source (1): Pluspetrol internal report Source (2): modified from Merryl Lynch well type for Eagle Ford (EOG) 11 Objective A2 - Understand what technical development, operation optimization, economic and martket conditions are needed to convert this resources into reserves Jan 2011 June 2011 Jul 2012 to Jan 2013 (Start Point) Jan 2012 250 Drilling Break Even @15% (u$s/Bbl) Nov 2013 Jan 2013 Testing Jan 2014 P90 EUR 200 150 P50 EUR 100 87 USD/bbl P10 EUR 2013 Costs 50 US Costs Drilling and completion Cost 0 Source: Pluspetrol internal report (Nov 2013) 12 Objective B – Work with BD to identify and aquire/participate in high potential unconventional blocks Jan 2011 June 2011 Jul 2012 to Jan 2013 (Start Point) Jan 2012 Nov 2013 Jan 2013 Jan 2014 Regional Map 13 Objective B – Work with BD to identify and aquire/participate in high potential unconventional blocks Jan 2011 June 2011 Jul 2012 to Jan 2013 (Start Point) Jan 2012 Nov 2013 Feb 2014 Jan 2013 Regional Map Jan 2014 Assets Aquired Total acreage : 687.000 acres Blocks operated by Pluspetrol La Calera Meseta B. Esperanza Aguada Villanueva 50% Pluspetrol 50% YPF Blocks operated by YPF Las Tacanas Chasquivil Cerro Arena 45% Pluspetrol 45% YPF 10% G&P Salinas del Huitrín All maturity windows included Oil Gas & Condensate Dry Gas 14 Agenda 1. Unconventional reservoirs impact in the US 2. Pluspetrol’s project 3. Massive Development in Argentina 15 Vaca Muerta development feasibility assessment Critical Factors for Unconventional Resource Development Pacer today (will change) for speed of market developments Source: Accenture report 16 Pluspetrol competitive advantages Key competitive advantages for a successful shale development “If you don’t have a competitive advantage, don’t compete”, Jack Welch Normalized drilling & completion cost 1. Good quality acreage 2. Low cost operator 1st operator 41 1st operator 47 3. Reservoir understanding Pluspetrol 43 Pluspetrol 51 4. Organization 3rd Operator 49 3rd Operator • A multidisciplinary team was assigned full time to the project • The learning curve was transited 2013 Vertical wells 4th Operator 94 5th Operator 100 2013/14 Horizontal wells 4th Operator 62 100 17 GROWING PRODUCTION FROM UNCONVENTIONALS COULD HAVE A MASSIVE SOCIAL AND ECONOMIC IMPACT IN ARGENTINA Production Rig Count Oil (Mbbl/d)* 1000 Shale Production 800 Conventional Production 600 400 200 2033 2031 2029 2027 2025 2023 2021 2019 2017 2015 2013 2011 2009 2007 2005 2003 2001 0 350 300 250 200 150 100 50 0 298 286 Rigs in Eagle-Ford 2010-2014 220 Proj rigs in Vaca Muerta from 2014 113 41 14 18 30 40 45 45 1 2 3 4 5 6 years Gas (BCF/d)* 12,0 10,0 8,0 6,0 4,0 2,0 0,0 Expected impact in Argentina Shale Production Conventional Production • Generate quality jobs • Reduce energy deficit • Improve commercial balance 2033 2031 2029 2027 2025 2023 2021 2019 2017 2015 2013 2011 2009 2007 2005 2003 2001 • Increase fiscal income • Spillover effect on regional and national general development Some key challenges… Capex and Wells 2015 - 2017 2018-2025 2026-2035 • Efficient and safe operations Capex 3 B$/year 10 B$/year 15 B$/year • Water management % GDP 0.7% 2% 2.3% 20 55 80 Rigs Total 2015-2035 Capex : 250 B$ Hor. Wells: 10,000 Vaca Muerta Recoverable Resources Development: 12% • Cost optimization • Attracting and developing talent • Growing local infrastructure • Win-win new paradigm: relationship with unions • Renew technical and managerial mindset: from conventional to unconventional * Assumes conventional supply declining at 3% per year and demand growing at 3% per year. Conventional gas production includes tight gas. ** According to EIA R2013 ecoverable Resources Estimates 18