Halliburton, Four Mexican Firms Get Chicontepec Contracts
July 22 2009 - 3:11PM
Dow Jones News
Oilfield-services giant Halliburton Co. (HAL) will make its
debut in August at a large Mexican oil basin where its main
competitors have already set up shop, said industry executives.
Halliburton has won a contract to drill 170 wells for Petroleos
Mexicanos at Chicontepec starting in mid-August, said the
executives, who are familiar with the contract.
Pemex, as the state oil company is known, has also awarded four
contracts for about 140 wells each to local drillers, expanding its
pool of suppliers for the expensive project.
The new contracts underscore Pemex's efforts to accelerate
spending and stabilize falling oil production, down by a fifth
since peaking in 2004. During the first half of this year, the
company spent only 38% of its exploration and production investment
budget.
The Chicontepec contracts were awarded directly to the companies
after Pemex declared a tender for the 170 wells void in May.
Halliburton was the only bidder that met the technical requirements
for the 170-well contract.
Pemex negotiated with the Houston-based company to lower its
price and awarded the contract directly without relaunching the
tender to save time, said one of the executives, who declined to be
named because he isn't authorized to speak to the media.
A Halliburton spokeswoman said the company had no comment. Pemex
didn't immediately respond to questions.
Halliburton's main competitor, Schlumberger Ltd. (SLB), has been
working with Pemex at Chicontepec since mid-2007, and won a second
contract to drill 500 wells in March.
Weatherford International Ltd. (WFT) has been drilling wells for
Pemex at Chicontepec for about a year. It expanded its work load in
March when it won a 500-well contract, compensating for a slowdown
in Venezuela, Argentina and Colombia where companies have cut
spending because of low oil prices.
"Mexico will continue to grow as we ramp up new contracts
throughout the year," said Weatherford President Bernard
Duroc-Danner during a conference call Monday.
The executives didn't have the value of Halliburton's contract.
Pemex is paying Weatherford and Schlumberger $1.3 million and $1.4
million per well, respectively, for the most recent drilling
contracts. These rates would put the Halliburton contract at over
$220 million.
Pemex designed the four 140-well contracts to include local
companies. Mexico has a strong tradition of oil nationalism, and
the heavy presence of foreign oil-service companies at Chicontepec
has raised criticism from opposition lawmakers. Pemex officials
have said they are making an effort to increase business with local
suppliers.
Among the companies awarded the contracts is Servicios
Integrales GSM, a unit of industrial conglomerate Grupo Carso SAB
(GCARSO.MX), which is owned by Mexican tycoon Carlos Slim.
Although Pemex is behind on its investment targets, the company
has spent heavily on oil exploration and production this year.
"We saw higher activity in Mexico, but it wasn't sufficient to
offset sequential reductions we experienced in Venezuela, Colombia
and Argentina," Halliburton Chief Financial Officer Mark McCollum
said on a conference call Monday.
Pemex plans to boost output at Chicontepec to help compensate
for a collapse at Cantarell, the largest oil field ever discovered
in Mexico where production has fallen to a third of peak levels. At
the start of this year Pemex announced $2.3 billion in planned 2009
investments at Chicontepec.
The basin has expensive-to-produce pockets of oil on land in
northern Mexico. The tricky geology offers opportunities to
companies such as Halliburton, which market advanced drilling
products and techniques to maximize production at difficult
formations.
Pemex has consistently fallen short of production targets at the
basin. The rock formations holding the oil have low pressure and
flow rates, making extraction difficult.
Pemex expects Chicontepec to pump 40,000 barrels a day in August
and 60,000 barrels a day by the end of the year. At the start of
2009 the company had higher expectations of 70,000 barrels a day on
average.
Pemex has also been slow at building roads and preparing
drilling sites in the area. Weatherford fell behind on two
contracts for a total of 600 wells it won in mid-2008, highlighting
the difficult nature of the formations.
Weatherford's Duroc-Danner said the company has improved
drilling times at Chicontepec by 20%.
-By Peter Millard, Dow Jones Newswires; 5255-5001-5724;
peter.millard@dowjones.com