This is the second major political decision to benefit Andes in the past two months. In November, Argentina elected the centre-right and pro-business Mauricio Macri as president, ending 12 years of increasingly unpopular rule under the Justicialist Party led by Néstor Kirchner and subsequently his wife Cristina. Following the election, Andes told the market it expected Mr Macri's policies and administration to benefit the Argentine oil and gas industry and attract foreign capital into the country.
With crude now edging towards $30 a barrel, Argentina's latest price fix is partly designed to concentrate anguished minds in oil company boardrooms. After years of mismanagement, massive inward investment is needed. And if that is directed to the energy sector and the largely untapped potential of Argentina's shale reserves in the Vaca Muerta, the long-term political prize for the country could be energy independence.
The new administration has made several other moves to rehabilitate its reputation among international investors. Currency controls brought in by Ms Kirchner in a failed effort to stop inflation have been lifted, allowing the overvalued peso to float freely and - it is hoped - exports to rise. Mr Macri is also taking steps to end the stand-off with the owners of Argentina's defaulted debt, so the country can once again access capital markets.
A lifting of currency controls could also help the energy sector in other ways. As we noted last May, the Vaca Muerta has strong geological parallels with US plays such as Eagle Ford and Barnett in Texas. But for drilling costs to mirror those areas, burdensome tariffs on imported equipment need relaxing, all of which should be helped by cuts to import taxes and permissions.
As previously detailed, Andes Energia is the only London-listed pure play on the Vaca Muerta, which Wood Mackenzie expects to double production by 2018. Andes has 250,000 net acres in the shale, boasts more than 500m barrels of certified resources and has a current break-even price of around $50 a barrel.
And while $67.50 is lower than last year's $75-a-barrel average, Andes, other producers and foreign investors have all been provided with significant shelter from the oil price rout, and a critical improvement in economic incentives. Speaking to the Investors Chronicle just before Christmas, Andes chief executive Alejandro Jotayan said the election had led to a flurry of enquiries from international investors, who "now recognise a stake in the Vaca Muerta will be profitable".
