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2017 Pemex Farmouts:
Attractive investment opportunities in partnership with Pemex
July 10, 2017
Agenda
• Background
• Pemex Exploration and Production
• New Farmouts
2
Motivation
• Pemex´s Business Plan is somewhat unique for various reasons:
• On the one hand, profitability is its guiding principle.
• On the other, PEMEX is a National Oil Company (NOC) (regulated prices, supply guarantee, the State’s largest tax contributor, consolidation with the public sector, asymmetric regulation, special fiscal regime, special labor regime).
• This plan is already being implemented, significant and tangible progress has been achieved.
3
The Short-term Challenge
Adjust cost structure and business strategy to a low oil price scenario
The Historic Opportunity
Use all instruments and flexibility available from the Energy Reform
Positioning for the Future: Challenge and Opportunity
4
Company
FORTUNE
500 98°
Pre
sent
alo
ng t
he e
nti
re v
alu
e
chain
8°
15°
5°
5°
7°
Oil producer
Refining company in the world
Logistics company in the world
by assets
Producer of petrochemicals in
Latin America
Trading company in the world
Sales equivalent
to Uruguay’s
GDP
More than 70 Products Sold
5
Pemex Industrial Transformation
Pemex Logistics
Pemex Ethylene
Pemex International
Pemex Exploration and Production
PEMEX at a Glance
Good Market Reaction
Strengthening of the financial balance1
Budget Adjustment
Financial Outlook: Achieving Stability
Today PEMEX has stable finances
1/ The financial balance considers the result from subtracting total expenses (including financing costs) from total revenues.
6
• Reassess investments
without compromising
future production
65 billion pesos
• Efficiencies and Cost
Reduction 35 billion pesos
• Cash Flow Injection to pay
suppliers 73.5 billion pesos
• Fiscal relief 40.2 billion pesos
• Pension Liabilty Support 184 billion pesos
70
120
170
220
270
320
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17
Pemex vs UMS 5a Pemex 5a USD
Financial Outlook: Access to financial markets and active liability management
• The markets have responded positively.
7
PEMEX’s Bonds 5y in Dollars
Yiel
d t
o m
atu
rity
(%)
Bas
is p
oin
ts
Historical
maximum
-148bp
Moody’s
Downgrade
Mar 31
Budget cut
Feb 12 Capitalization
Announcement
Apr 13
Source: Bloomberg
US election
Nov 8
178 basis points.
Financial Outlook: Scenarios with Realistic Premises
• 2017 marks an inflection point:
• Primary Surplus (first time since 2012) 8.4 billion pesos
• Attainable Production Platform 1.944 million barrels per day
• Conservative Price Projection 42 dollars per barrel
8
55 58
59 60 61
42
54 55 57 56 48
56
68 71 71
40
45
50
55
60
65
70
75
2017 2018 2019 2020 2021
Price of Oil (USD per Barrel)
BRENT futuros PEMEX
Source: Bloomberg (October), Company´s website and Pemex.
-32
-58 -40 -49
-36
-133 -147
-102 -94
-84
-64
-1
43
-35
3
92
145
-200
-150
-100
-50
0
50
100
150
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
Financial Cash Flow (billions of pesos)
Plan de Negocios MejoradoBusiness Plan Improved
2,6
01
2,5
77
2,5
53
2,5
48
2,5
22
2,4
29
2,2
67
2,1
30
1,9
44
2,0
06
2,0
37
2,0
72
2,1
96
-
500
1,000
1,500
2,000
2,500
3,000
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Oil Production (Thousands of barrels per day)
Business Plan Improved
In 2016 Pemex exceeded its financial cash flow and production goal.
0
40
80
120Net Performance and Mexican mix price
Net
Pe
rfo
rma
nce
1
MX
N b
illio
ns
Me
xic
an
Mix
Pri
ce
US
D/b
1 Quarterly results, with the exception of 1Q17, which are preliminary results.
4
9
(8
1) (24
)
34
(2
6)
24
(28
)
(4)
(49
)
(39
)
(77
)
(36
)
(53
)
(60
)
(11
8)
(10
1)
(85
)
(16
8)
(3
60
)
(62
)
(8
3)
(11
8)
73
88
(450)
(370)
(290)
(210)
(130)
(50)
30
110
1T2011 3T2011 1T2012 3T2012 1T2013 3T2013 1T2014 3T2014 1T2015 3T2015 1T2016 3T2016 1T2017
The first two consecutive Positive Quarters since 2011
9
Agenda
• Background
• Pemex Exploration and Production
• New Farmouts
10
Pemex Exploration and Production: Context
• Round 0 gave PEMEX 22.2 billion barrels of 3P reserves in 2016.
• The Rounds 1.2 and 1.3 auctioned 528 million barrels.
• Trion, has 500 million barrels of 3P reserves.
• PEMEX was the 8th largest oil producer in the world in 2015.
World ranking by oil production
1/ In 2015, PEMEX’s total hydrocarbons production totaled 3.3 million barrels of oil equivalent per day.
Oil production in 2015 (Millions of barrels of oil per day)
11
∆+54%
PEP investment Evolution
∆-38%
0
50
100
150
200
250
300
350
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Bill
ion
s o
f p
eso
s (c
urr
ent)
Pemex Exploration and Production: Challenge and Opportunity
PEMEX Oil Production (Million barrels of oil per day)
Onshore Other offshore Cantarell Ku-Maloob-Zaap
12
The Challenge Replace Cantarell’s drop in production
The Opportunity Use the flexibitlity and the tools provided by the Energy Reform
Pemex Exploration and Production: Strategies
1. Concentrate on fields that are profitable for Pemex:
• Change the fiscal regime of fields that are not profitable under the current regime.
2. Aggressive Farmout strategy and alliances:
• In onshore and shallow waters fields to increase production and efficency.
• In deep water discoveries to accelerate field development and exploitation.
3. Increase reserves through participation in Mexican Rounds:
• Pemex won a block in Round 1.4 in a strategic alliance with Inpex and Chevron.
• Pemex won two blocks in Round 2.1 in a strategic alliance with Deutsche Erdoel AG (DEA) and Ecopetrol.
4. Exploration and Extraction Service Contracts (CSIEEs). New risk-based contracts.
• The contractor gets a fixed fee per barrel.
13
Agenda
• Background
• Pemex Exploration and Production
• New Farmouts
14
• The Energy Reform provides Pemex with a new and historic opportunity: the possibility of partnering with private companies in order to develop its own fields with the best international practices, while at the same time sharing costs and risks.
• Taking advantage of this new opportunities Pemex intends to offer four farmouts in 2017:
• For Ayin – Batsil, Cárdenas – Mora and Ogarrio the following information is now available at www.rondasmexico.com: • Joint Operation Agreement • Qualification criteria • Bid terms
Field type Name Inscription deadline Date of bid
Shallow waters Ayin - Batsil July 28, 2017 October 4 (Pemex´s round)
Onshore Cárdenas - Mora Ogarrio
July 28, 2017 October 4 (Pemex´s round)
Deep water Nobilis - Maximino To be determined December (jointly with round 2.4)
Investment Opportunities
15
Ayín - Batsil
16
Ayín-Batsil
3P Reserves 359 Million barrels of oil equivalent (Ayín & Batsil hold 80% of the volume)
Oil type Heavy oil
Exploration opportunities
224 Million barrels of oil equivalent in three prospective resources (on average, unrisked)
Contract type Production Sharing
Area (offshore) 1,096 km2
Shallow waters 80 to 170 meters
Fiscal regime:
Government Share Min: 18.2%
Max: 25%
Round 1.1
Round 1.2
Round 2.1
Ayín – Batsil
Exploration blocks
Tabasco
Campeche
24 km from “Centro de Proceso Litoral-A”
& 50 km from shore
7
Cárdenas - Mora
17
Cárdenas-Mora
1P Reserves 92 Million barrels of oil equivalent
Oil type Light oil
Technical challenges
• Potential for secondary and tertiary recovery (current oil recovery factor of 35%)
• Low production costs • Existing infrastructure with capacity to
process additional production
Contract type License
Area (onshore) 168 km2
Fiscal regime
Additional royalty Min: 1%
Max: 13%
Ogarrio
Mora
Cárdenas
Round 1.2
Round 1.3
Farmouts Cárdenas-Mora and Ogarrio Exploration blocks
Ogarrio
Ogarrio
Mora
Cárdenas
Ogarrio
1P Reserves 41 Million barrels of oil equivalent
Oil type Light oil
Technical challenges
• Opportunities to improve and increase production in the short term through interventions of existing wells
• Mature field with potential to significantly increase the oil recovery factor (current oil recovery factor of 27%)
Contract type License
Area (onshore) 156 km2
Fiscal regime
Additional royalty Min: 1%
Max: 13%
18
Round 1.2
Round 1.3
Farmouts Cárdenas-Mora and Ogarrio Exploration blocks
Nobilis - Maximino
19
1
Trion
Oil Fields Round 1.4
Nobilis –Maximo
Exploration Blocks
220 km from shore
Tamaulipas
40 km from Trion
20 km from Great White
Nobilis-Maximino
3P Reserves 502 Million barrels of oil equivalent (Nobilis and Maximino)
Oil type Light oil
Technical challenges
• 171 Million barrels of oil equivalent of contingent resources (Supremus and Mirus)
• 715 Million barrels of oil equivalent in prospective resources (avg., unrisked) in four identified exploration prospects
Contract type License
Area (offshore) 1,524 km2
Deep waters ~3,000 meters
Disclaimer
• The materials presented do not purport to be complete or contain all of the information that a recipient may require. No representation or warranty is made as to the accuracy, reliability or completeness of any information contained in these materials. All interested persons or companies must carry out their own due diligence in respect to the matters referred to and satisfy themselves as to their accuracy. All information, predictions and resource projections in these materials have been prepared by Pemex for illustrative purposes only. They do not constitute and should not be regarded as a representation that the information is accurate and that predictions and resource projections will actually be achieved. The predictions and resource projections are subject to uncertainties and contingencies, all of which are difficult to predict. Pemex does not accept any liability for financial or investment decisions made from these materials. Please note that the official public bidding process is administered by CNH (Comisión Nacional de Hidrocarburos). For official information about the farm-out process, please visit:
http://www.rondasmexico.gob.mx
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