“One day it'll come out that the CIA infiltrated Western consulting firms and convinced Saudi to blow its wealth on LIV Golf, The Line, domestic soccer, Lucid, a ski resort, an artificial lake, World Cup stadiums & a giant cube instead of converting it into geopolitical influence.” - John Arnold
Editor’s Note: A day late. Built a model of the integrated Argentina LNG project - saved here.
ARGENTINA.
The Vaca Muerta has been in the news; among other reports, the basin is attracting investment from a wide range of characters.
From Peter Thiel to Harold Hamm, capital is coming in.
Which begs the question - is the easy investment, YPF, a good one?
Yesterday, BofA reiterated its buy rating on YPF, with a deep dive on its domestic LNG project.
The high-level pitch:
A $51BN, 18 mtpa integrated project,
That earns 23-28% levered IRRs; and,
Is worth $4.1BN to YPF - none of which is yet in their target price
So, we rebuilt the project economics from the ground up using BofA's assumptions.
Our operating numbers land within 3-4% of theirs…
…our returns don't.
We get ~20% & ~24% IRRs & roughly $1.7BN of value to YPF.
Differences aside, both results say the same three things:
The project works;
The RIGI is non-negotiable; and,
The LNG price makes / breaks it -
CHOKEPOINT FATIGUE.
Geopolitics (as well as Javier Milei’s government) are driving investment into Vaca Muerta.
And LNG is the angle:
Roughly a fifth of the world’s LNG moved through the Strait of Hormuz in ‘25
Since the Iran conflict began, tanker traffic through the strait has collapsed & Qatari LNG output is running about 90% below last year’s levels
Despite record growth from the US & Canada, global LNG supply is expected to fall year-on-year in ‘26
If Qatar is still offline in 4Q26, then lost volumes would exceed the Russian pipeline gas Europe lost in ‘22
European storage is sitting near ‘21 seasonal lows after a poor injection season & a record-hot summer
The strategic conclusion is simple: buyers & investors are now willing to pay a premium for large, low-cost supply that sits nowhere near a chokepoint -
YPF & THE LNG PREMIUM.
We built the project as an integrated, nominal-dollar model (well-vintage upstream, midstream/LNG segment, project-finance debt, FCFF/FCFE), using BofA's assumptions where relevant, and filled the gaps left with our own assumptions.
Operations reconcile almost exactly:
Returns don't.
What that means per share: BofA's $4.1BN of YPF value across both phases is about US$10 per ADR - roughly 20% of the current price.
Our $1.7BN is ~$4 / ADR.
Either way it is real value that’s not baked in, and either way it is a decade-long option on LNG prices -
OTHER.
Strongly recommend BofA’s YPF/LNG update
Chamath on the compute commodity
Interesting update from Ramp on AI/Token consumption
Hasta la vista -