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Mexico’s Energy Industry, Results of Ronda Uno, Third Tender
Blog AG Speaking Energy

Akin Gump Strauss Hauer & Feld LLP

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Mexico December 16 2015

Energy Alert 1 December 16, 2015 Mexico’s Energy Industry Results of Ronda Uno, Third Tender If you read only this… On December 15, 2015, the Mexican Comisión Nacional de Hidrocarburos (CNH) completed the third stage of its so–called “Round One” upstream oil and gas auctions. It is estimated that these contract areas contain an estimated 2.5 billion barrels of oil equivalent (boe) distributed in multiple oil and gas fields. As a major shift from the first two tenders, the CNH used a license as the model contract to facilitate the entry of domestic participants and smaller IOCs. Overall, the results should be considered rather surprising. Despite extremely low commodity prices and an ailing oil and gas industry, almost 100 different companies expressed formal interest in taking part in the Third Tender and 71 companies (36 individual companies and 16 consortiums) prequalified to present bids. On December 15, 2015, the Mexican Comisión Nacional de Hidrocarburos (CNH) completed the third stage of its so–called “Round One” upstream oil and gas auctions. The Third Tender included 25 mature onshore contract areas distributed across four states, Chiapas, Nuevo Leon, Tabasco and Tamaulipas. It is estimated that these contract areas contain an estimated 2.5 billion barrels of oil equivalent (boe) distributed in multiple oil and gas fields. The Mexican government divided the blocks into two types based on size and estimated remaining recoverable hydrocarbons. The blocks were onshore, smallproducing and mature areas that were structured to incentivize local companies and smaller companies to participate in the new oil and gas exploration market. As a major shift from the first two tenders, the CNH used a license as the model contract to facilitate the entry of domestic participants and smaller IOCs. Licenses are less complicated, as they do not involve cost recovery or sharing with the state like production-sharing agreements. Also, as it did during the Second Tender, the Mexican government published its minimum requirements ahead of the bid deadline. Overall, the results should be considered rather surprising. Despite extremely low commodity prices and an ailing oil and gas industry, almost 100 different companies expressed formal interest in taking part in the Third Tender and 71 companies (36 individual companies and 16 consortiums) prequalified to present 2 bids. Early estimates had considered that awarding 20 percent of the blocks on offer would be a considered a success for Mexico. However, participants far exceeded these expectations and 100 percent of the available contract areas were awarded. The most active participants included Geo Estratos, which obtained four contract areas in northern Mexico, Renaissance Oil, which obtained three contract areas in southern Mexico and Strata Campos Maduros, which obtained three contract areas in Burgos. Overall, government officials expect almost $620 million in revenues over the first five years of these contracts. Not only were all contract areas awarded, the bids far exceeded the minimum bids established by the government. Below is a list of all of the winning bidders from the Third Tender and their corresponding bids in terms of a percentage royalty to the government and increases in the stated minimum work programs: Results Contract Area Winning Bidder Surface Area (km2) Estimated Available Resources (MMboe) Minimum Government Royalty (%) Minimum Work Units Winning Bid Government Royalty (%) Increase in Minimum Work Units (%) Tajon (Type 2) South Compañía Petrolera Perseus, S.A. de C.V. (México) 27.5 734.9 5 4,600 60.88 100 CuichapaPte (Type 2) South Servicios de Extracción Petrolera Lifting de México, S.A. de C.V. (México) 41.5 324.4 2.5 4,800 60.8 99 Moloacan (Type 2) South Canamex Dutch B.V., Perfolat de México, S.A. de C.V. & American Oil Tools S. de R.L. de C.V. (Netherlands - México) 46.3 201.9 5 5,000 86.6 0 Barcodon (Type 2) Diavaz Offshore, S.A.P.I. de C.V. (México) 11 158.5 1 4,700 64.5 100 Mundo Nuevo (Type 1) South Renaissance Oil Corp S.A. de C.V. (Canada) 27.7 101.4 10 4,600 80.69 25 3 Contract Area Winning Bidder Surface Area (km2) Estimated Available Resources (MMboe) Minimum Government Royalty (%) Minimum Work Units Winning Bid Government Royalty (%) Increase in Minimum Work Units (%) Paraíso (Type 1) South Roma Energy Holdings, LLC Tubular Technology, S.A. de C.V. & GX Geoscience Corporation, S. de R.L. de C.V. (USMéxico) 17 86 10 8,700 35.99 100 Catedral (Type 1) South Diavaz Offshore, S.A.P.I. de C.V. (México) 58 60.1 1 4,600 63.9 0 Topen (Type 1) South Renaissance Oil Corp S.A. de C.V. (Canada) 25.3 43.2 10 4,600 78.79 25 Mayacaste (Type 1) South Grupo Diarqco, S.A. de C.V. (México) 21.9 31.8 10 8,700 60.36 0 Malva (Type 1) South Renaissance Oil Corp S.A. de C.V. (Canada) 21.2 22.2 4 4,700 57.39 100 Pena Blanca (Type 1) Burgos Strata Campos Maduros, S.A.P.I. de C.V. (México) 26 15.8 5 4,600 50.86 100 BenavidesPrimavera (Type 1) Burgos Sistemas Integrales de Compresión, S.A. de C.V., Nuvoil, S.A. de C.V. & Constructora Marusa, S.A. de C.V. (México) 17.15 15.6 2.5 4,600 40.7 75 4 Contract Area Winning Bidder Surface Area (km2) Estimated Available Resources (MMboe) Minimum Government Royalty (%) Minimum Work Units Winning Bid Government Royalty (%) Increase in Minimum Work Units (%) Fortuna Nacional (Type 1) Burgos Compañía Petrolera Perseus, S.A. de C.V. (México) 22 14 1 4,600 36.8 100 Ricos (Type 1) Burgos Strata Campos Maduros, S.A.P.I. de C.V. (México) 23.7 8.8 3 4,600 41.5 100 Mareógrafo (Type 1) Burgos Consorcio Manufacturer o Mexicano, S.A. de C.V. (México) 29.8 8 4 4,600 34.2 100 Carretas (Type 1) Burgos Strata Campos Maduros, S.A.P.I. de C.V. (México) 89.4 8 1 4,600 50.86 100 Pontón (Type 1) North Geo Estratos, S.A. de C.V. & Geo Estratos Mxoil Exploración y Producción, S.A.P.I. de C.V. (México) 11.8 7.3 1 4,600 61.5 100 Tecolutla (Type 1) North Geo Estratos, S.A. de C.V. & Geo Estratos Mxoil Exploración y Producción, S.A.P.I. de C.V. (México) 7.2 7.3 1 4,600 68.4 100 5 Contract Area Winning Bidder Surface Area (km2) Estimated Available Resources (MMboe) Minimum Government Royalty (%) Minimum Work Units Winning Bid Government Royalty (%) Increase in Minimum Work Units (%) Secadero (Type 1) South Grupo R Exploración y Producción, S.A. de C.V. & Constructora y Arrendadora México, S.A. de C.V. (Mexico) 9.8 6.7 1 4,600 60.7 100 Duna (Type 1) Burgos Construccion es y Servicios Industriales Globales, S.A. de C.V. (México) 36.7 6.3 3 4,600 20.08 88 San Bernardo (Type 1) Burgos Sarreal, S.A. de C.V. (México) 28.2 5.2 1 4,600 10.5 80 Calibrador (Type 1) Burgos Consorcio Manufacturer o Mexicano, S.A. de C.V. (México) 16.1 4.6 3 4,600 41.7 100 La Jaja (Type 1) North Geo Estratos, S.A. de C.V. & Geo Estratos Mxoil Exploración y Producción, S.A.P.I. de C.V. (México) 10.2 17 1 4,600 66.3 100 Calicanto (Type 1) South Grupo Diarqco, S.A. de C.V. (México) 10.6 1 5 4,600 81.3 18 Paso de Oro (Type 1) North Geo Estratos, S.A. de C.V. & Geo Estratos Mxoil 23.1 0.3 1 4,600 67.61 30 6 Contract Area Winning Bidder Surface Area (km2) Estimated Available Resources (MMboe) Minimum Government Royalty (%) Minimum Work Units Winning Bid Government Royalty (%) Increase in Minimum Work Units (%) Exploración y Producción, S.A.P.I. de C.V. (México) 7 Contact Information If you have any questions regarding this alert, please contact. Steven P. Otillar [email protected] 713.250.2225 Eduardo Canales [email protected] 713.250.2131

Akin Gump Strauss Hauer & Feld LLP - Steven P. Otillar and Eduardo Canales
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