Azabache optimistic on Argentina despite oil prices, inflation

Despite inflation rates in the high teens to low twenties and a steep decline in global crude oil prices, the long-term E&P outlook in Argentina is positive, according to Azabache Energy.

The South America-focused junior holds exploration concessions in the Neuquén and Magdalena basins of Argentina and Colombia, respectively.

"The three top candidates for the next president of Argentina are all pro-business," the Calgary-based company said in an update filed with Canadian securities regulator SEDAR.

It added: "The recent changes in [hydrocarbon] laws provide better incentives for foreign investors, higher prices for oil and opportunities to remit a portion of long term profits back to offshore parent companies."

Azabache cited energy reforms passed by legislators in October 2014 as a recent indicator of an improving investment climate,

"The only way for [Argentina's] economy to become sustainable is to adopt a serious change in its exploration strategy, mainly led by the promising resources of the Vaca Muerta shale oil and other tight gas reservoirs present in the Neuquén basin," Azabache said.

Azabache reached an agreement in late 2014 with Neuquén province's state-run oil company GyP Neuquén to carry out a 76,000-acre (308km2) 3D seismic shoot, frack two existing wells, and drill and frack three new vertical wells at the Covunco and El Corte licenses in the province.

Azabache tagged the estimated investment cost of the program at US$60mn.

Due to delays stemming from "environmental and other issues" in Colombia, Azabache said it is evaluating ways to terminate its E&P contract at the Antares block. At the La Mona block, the firm cannot begin drilling until after April because of restrictions related to water shortages.

Colombia remains an attractive opportunity for foreign operators, although delays in the environmental approval process for drilling permits has affected some companies' drilling schedules, Azabache said.

Azabache reported a net loss of Cdn$1.122mn (US$ 902,352) for 4Q14, compared with a loss of Cdn$1.55mn in 4Q13.