Pemex negotiates lower rig rates as crude collapse hurts profits

ADAM WILLIAMS

MEXICO CITY (Bloomberg) -- Petroleos Mexicanos is negotiating reduced rig rates with all of its providers after the state-owned oil producer posted a ninth straight quarterly loss on slumping crude prices.

Pemex is in talks with oil service and jack-up rig providers to reduce daily rates after the board approved cutting more than $4 billion from its 2015 budget last week. The Mexico City-based company will seek cuts that will probably be less than the 35% to 40% reductions recommended by consulting firm IHS Inc., said Pemex’s exploration and production director.

“We have talked with service companies and agreed that actions need to be taken in order to reduce the effect of the impact of the oil price reductions,” E&P Head Gustavo Hernandez said on an earnings conference call.

Pemex is analyzing a series of actions to reduce spending after reporting a quarterly net loss of $7.75 billion and a 10% decline in sales, Chief Financial Officer Mario Beauregard said on the same call. Crude prices slumped about 50% in the past year.

Pemex terminated service and drilling contracts with Diamond Offshore Drilling last week and will announce job cuts in the coming weeks, Beauregard told Radio Formula last week.

10,000 Jobs

As many as 10,000 people working at Mexican oil service companies were laid off in early January as Pemex eliminated contracts. Pemex drilled 120 wells in the quarter, 36% less than a year earlier.

Drilling rig contractors with the most exposure in offshore Mexico are Grupo Mexico SAB unit Perforadora Mexico, with five drilling contracts; Paragon Offshore with seven and Diamond with five rigs, according to Andrew Cosgrove, energy analyst for Bloomberg Intelligence.

Pemex’s oil production for the year slumped to its lowest level since at least 1990, when the government began recording output data. The company will also trim day rates for supplementary activities such as supplier vessels, helicopters, and hotels so that the company’s meets a production goal of 2.4 MMbopd this year, Hernandez said.