Mexico’s Alfa Out of Pacific Exploration Restructuring

4/14/2016 The Wall Street Journal

energy - oil barrelsMEXICO CITY—Mexican industrial conglomerate Alfa SAB  made proposals for a restructuring of Canadian-Colombian oil firm Pacific Exploration & Production Corp. but is no longer involved in the process, a company official said Thursday.

Monterrey-based Alfa, which has a 19% stake in Pacific, made serious proposals for improving Pacific’s financial situation, but the oil company chose a different route, Alfa chief financial officer Ramón Leal said in a conference call with reporters.

Pacific said earlier Thursday that it agreed to negotiate a restructuring with private-equity investment firm Catalyst Capital Group Inc. and with creditors, following a recommendation from an independent committee of Pacific’s board. Terms are still being worked on and there is no assurance a deal will be reached.

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New Publications | Global Agenda Council on the Future of Oil & Gas

Mexico Institute Director Duncan Wood has been working with the World Economic Forum’s Global Agenda Council on the Future of Oil and Gas for the past two years. They have now published several short publications and blog posts. Check them out below!

Blog Posts:

What happens when demand for oil peaks

Big oil has a big trust problem – can the industry put that right?

Publications:

Future Oil Demand Scenarios

Trust Challenges Facing Global Oil & Gas Industry

Future of Oil & Gas (synthesis)

Also, check out the Global Agenda Council on the Future of Oil and Gas’ webpage here: https://www.weforum.org/communities/global-agenda-council-on-the-future-of-oil-gas

Mexico Government to Support Pemex With $4.2 Billion

4/13/2016 The Wall Street Journal

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MEXICO CITY—Mexico’s government said Wednesday it will support troubled state-oil firm Petróleos Mexicanos, or Pemex, with $4.2 billion in fresh capital and money to make this year’s pension payments, a step some analysts saw as insufficient if oil prices remain low.

Depressed oil prices and declining oil production have led to a liquidity crunch in recent months for Pemex, Mexico’s largest company by sales and the world’s eighth-largest oil producer. The move was widely expected after the government repeatedly said it would provide financial support to Pemex, which contributes nearly 20% of the federal budget.

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Mexico Will Defer Oil Exploration Projects to Slash Spending

3/1/16 ABC

energy- oil pumps 2The state-run oil company, Petroleos Mexicanos, said Monday it will slash spending 22 percent and cut unprofitable production about 100,000 barrels a day as it struggles with liquidity problems and past-due payments to suppliers.

The company, known as Pemex, said it will cut $5.5 billion from its 2016 budget, delay deep-water exploration and decrease production of super-heavy crude because of low world oil prices.

Delaying production and exploration projects will account for about two-thirds of the $5.5 billion spending cut.

Pemex still faces a serious issue: It owes suppliers almost $7 billion, a debt the company acknowledges is a problem.

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Depressed Energy Prices Cause Decline in U.S.-Mexico Trade


2/23/2016 Forbes.com

By Christopher Wilson, Deputy Director, Mexico Institute

forbesFrom 2009-2014, U.S.-Mexico trade skyrocketed. Bilateral trade grew 75%, faster than U.S. trade with any other major trading partner, including China (61%), and importantly, both imports and exports were growing rapidly. In 2015, trade growth came to a screeching halt, though strong fundamentals suggest this may be more of a temporary blip than a new trajectory.

The Census Bureau recently released U.S. merchandise trade statistics for 2015, and though Mexico is still the United States’ second largest export market and third largest overall trading partner, for the first time since the economic crisis of 2008-2009, U.S.-Mexico trade declined from the previous year’s level. Interestingly, as shown in the graph below, U.S.-Canada trade dropped sharply in 2015, allowing China to become the United States’ top trading partner. In 2014, the two countries traded $534.3 billion, but in 2015 that number fell to $531.1, a decline of some $3.2 billion dollars. U.S. imports from Mexico basically held steady, growing from $294.1 to $294.7 billion, although this apparent stagnation masks multiple underlying trends. Exports, on the other hand, dropped some $3.8 billion. This brief analysis examines recent trends in bilateral trade and their implications for the future of U.S. and Mexican economies.

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That Didn’t Work as Planned: Mexico’s Oil Monopoly Ends, Then Oil Tanks

pemex2/21/2016 Bloomberg Business

The timing couldn’t have been worse. The end of the 76-year Petroleos Mexicanos monopoly was supposed to unleash an investment flood with companies rushing to develop massive oil reserves. It was going to be historic, and then came the rout.

“It’s tragic that Mexico waited so long to open the sector and that when an administration finally passed a meaningful energy reform, the bottom just falls out of oil prices,” said Tim Samples, a Mexican-energy analyst at the University of Georgia in Athens. “The parade did not last very long.”

Now opponents of President Enrique Pena Nieto, who was accused in some quarters of treason when he denationalized the industry in 2014, are saying they’re being proven right. Some want to bring the monopoly back. “A reform needs to be done to the energy reform,” said Jesus Zambrano, president of the Chamber of Deputies, the lower house of the national legislature, last week.

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Pemex: Passing the Baton

2/17/2016 The Expert Take, Mexico Institute

By Jesús Reyes Heroles

expert I (2)The recent restructuring of Petroleos Mexicanos requires a reflection on the causes. Since 1980, there have been 13 general managers with an average duration of 2 years and 9 months.

This “management” instability is not only explained by the complexities of the company and the miscalculations of its administrations; but rather, it is better explained by the applicable corporate governance framework and fumbling public policy. Over the years, it has repeatedly been observed that the regulatory framework of Pemex became sluggish and inefficient, and even the intensive energy reform of 2013 proved unable to correct this problem.

PEMEX evolved reasonably well when the federal government and the country had not yet become deeply dependent on oil revenues. However, in 1979, the exploitation of the Mega Cantarell Complex started, and the company achieved a greater financial and operational dimension. At this point, the government sought to have an opinion, to influence and even to participate in the handling of policies applicable to Pemex.  Here lies the origin of the replacement of last week.

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