Aleph Midstream—Vaca Muerta’s first midstream player—received commitments totaling roughly $205 million plus the majority of Vista Oil & Gas’ midstream assets. (Source: Shutterstock.com)
Vista Oil & Gas SAB de CV is set to launch the first midstream player focused on the Vaca Muerta Shale in Argentina supported by a multimillion-dollar investment from two private-equity firms.
On June 27, Vista announced the creation of Aleph Midstream SA—the first midstream player focused on providing gathering, processing and evacuation services for oil and gas production of Argentina’s Vaca Muerta shale play.
Aleph will focus on “spearheading a new paradigm for the development of this world-class shale play built on the concept of long-term partnerships with upstream-focused producers underpinned by acreage dedication agreements,” according to a release from Riverstone Energy Ltd., one of the newly-formed company’s financial backers.
Argentina is ranked by the U.S. Energy Information Administration as having the fourth-largest technically recoverable shale oil reserves in the world, roughly 60% of which is located in the Vaca Muerta Shale within the Neuquén Basin. Development of the Vaca Muerta has been on the agendas of several big oil companies including Exxon Mobil Corp., which announced plans in June to expand its Vaca Muerta project.
The only thing missing, according to Vista, is a midstream service provider that would allow for more rapid production growth and lower development costs in the South American shale play.
“The growth of production of oil and gas from the Vaca Muerta shale formation in Argentina has created a need for gathering, processing and evacuation midstream investments, as well as potential needs for oil and gas storage, condensates handling and additional oil and gas trunk pipeline capacity,” Vista said in a company release on June 27.
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RELATED:
“Vaca Muerta: Poised For Liftoff” featured in the March 2019 issue of Oil and Gas Investor
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Vista said it entered into an investment agreement on June 27 to create Aleph with affiliates of Riverstone Energy and Southern Cross Group plus certain individual unnamed co-sponsors.
In total, Aleph received commitments of roughly $205 million that is expected to be deployed over the next 24 months. This included the contribution of a majority of Vista midstream assets located in the Neuquén Basin, valued at about $45 million.
In exchange for their investment, Aleph financial sponsors acquired a controlling interest of up
to 78.4% of Aleph’s total equity. Meanwhile, Vista will hold an equity interest in Aleph of at least 21.6%.
Vista said Aleph will use proceeds from the investment to fund the construction of midstream assets, including for the gathering, processing and evacuation of Vista’s oil and gas production in the Neuquén Basin. Starting in January 2020, Aleph is expected to begin providing certain midstream services to support Vista’s Bajada del Palo Oeste shale development in the Vaca Muerta.
“By providing midstream services, Aleph Midstream could allow upstream players to focus on their core E&P activities,” Vista said in its release.
The transaction is expected to close in July and remains subject to regulatory approvals.
Lawyers with Mayer Brown LLP acted as co-counsel to Vista Oil & Gas in its investment agreement with affiliates of Riverstone, Southern Cross and other sponsors to create Aleph Midstream. The law firm’s team included partners Pablo Ferrante and Thomas Moore.
Gibson, Dunn & Crutcher LLP represented Evercore as financial adviser to Vista Oil & Gas on its investment agreement to create Aleph Midstream. The team was led by Houston partner Hillary Holmes and included associates Harrison Tucker and Jordan Rex.
Meanwhile, Vinson & Elkins (V&E) advised Riverstone Energy and its subsidiaries in the Aleph investment agreement. The V&E corporate team was led by partner Maritza Okata, senior associate Jeff Shah and associate Kelly Reddington with assistance from associate Stancell Haigwood.
Emily Patsy can be reached at epatsy@hartenergy.com.
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