Yesterday, by Disposition 335/2019 of the Hydrocarbons and Fuels Under-Secretariat, a new procedure to evaluate the net worth and financial solvency requirements of companies that want to hold exploration permits, exploitation concessions and/or transportation concessions ("New Procedure") was established. The New Procedure abolished Resolution 193/2003 ("Resolution 193") and -considering today's oil prices and exchange rate- implies, approximately, a 3,100% increase of the net worth requirements in place since 2003 (Resolution 193).
Under the New Procedure, companies must prove a variable minimum net worth, equal to the value in argentine pesos of 27,000 barrels of crude oil for on-shore and 270,000 barrels for off-shore operations. Such net worth, must be calculated multiplying the average price of a barrel of national crude oil of the previous year published by the National Government, by the average wholesale exchange rate during the same period published by the Central Bank of Argentina.
Companies must prove this new minimum net worth to (i) be awarded exploration permits, exploitation concessions and/or transportation concessions; and (ii) be approved as assignees of exploration permits, exploitation concessions and/or transportation concessions (either in total or partial assignments).
In addition, oil and gas companies holding permits and/or concessions must evidence this requirement to update their annual registration before the National Registry of Oil and Gas Companies.
The net worth requirement can be met through a financial support granted by a controlling company, an affiliate or a third party. There, the guarantor must prove a net worth three times that required to the permit holders and/or concessionaires.