Vaca Muerta Sur Turns to Argentina's Local Debt Market to Finance Final Project Stage

Vaca Muerta Sur is preparing to enter Argentina's local debt market for the first time as the oil consortium moves toward the final stage of its export megaproject. The company plans to issue a negotiable obligation worth US$150 million this year, with the possibility of increasing it to US$200 million, according to an investor presentation obtained by Clarín.

The fundraising forms part of the financing structure for the US$3.3 billion project. It will connect the Vaca Muerta oil formation in Neuquén province to a new export terminal on the Gulf of San Matías in Río Negro. By August, construction had reached nearly 80% physical progress, while economic progress stood at 68%.

The bond is expected to mature in four years, with the principal repaid in full at maturity and interest paid every six months. It will be denominated in U.S. dollar MEP, carry a fixed rate set during the auction and, according to the presentation, hold an AAA rating from FIX. The minimum subscription will be US$100. The company plans to hold a roadshow next week to attract investors.

Local issuance is only one part of the financing plan, which also benefits from Argentina's Large Investment Incentive Regime. VMOS expects to cover about US$2 billion through international debt, US$1 billion through shareholder contributions and another US$300 million through local-market debt or bank loans. Banks have approved up to US$2 billion for the international financing, of which US$1.628 billion had been disbursed by August. Shareholders had contributed US$698 million.

About US$2.977 billion of the total project cost represents capital investment, including US$1.510 billion for the pipeline and US$1.466 billion for the terminals. The remainder will mainly cover construction-period interest, taxes and a cash reserve. The consortium includes YPF, Pluspetrol, Pan American Energy, Vista, Pampa Energía, Chevron, Shell and Tecpetrol. It expects to begin operations in the first half of next year with capacity of 180,000 barrels per day, then scale to 390,000 and 550,000 barrels per day by the end of 2027. A later expansion is planned to lift capacity to 700,000 barrels per day from 2029.