On Contract Migration I did speak to management this week.
According to management the process is still moving forward and they have made significant steps forward. ROE and Pemex made the formal application to SENER. The comments and questions came back from SENER to ROE and Pemex. This was reviewed and ROE has answered all questions posed by the various Gov’t Departments. The last set of comments and revisions has gone back to Pemex for its final review and approval. ( Remember,Pemex Board of Directors approved the original proposal back last June). ROE has done all the work needed to be done on the contract and proposed development of the field. Apparently, once Pemex gives its approval the various other Departments who have to approve will follow the Pemex approval and recommendations. It is a near term approval apparently. (But managment does not know how long this will take.)
The process is slow as the Pemex managers who are dealing with the approval are cautious and reluctant to move things quickly as their have been so many changes in Pemex and the new head of Pemex is not in experienced in Oil or at Pemex. Nobody wants to make a mistake. The other challenge is that a lot has been thrown at Pemex with the new Refinery process, theft control, and the goal of AMLO to have Pemex bring 20 new fields into production this year along with drilling 500 plus new wells. ROE has pushed themselves to the top of the migration list and the key approval is now back in front of Pemex. However, the Pemex people have to deal with all of the other demands being made upon them as well. ROE has emphasized how the Amititaln project will solve a lot of problems for Pemex and the Government and that moving this project forward can be done without Pemex having to spend any money unless it chooses to do so and Pemex does not need to tie up any of its personnel.
Management was clear that in their view the migration will happen, the only question is how much longer it will take. The ROE management team is as frustrated at the delays as we are as investors. Management is proceeding as if everything has been approved.
Kevin Smith and Craig Steinke have both been in Mexico all of this week, working on moving it forward and working on the drilling plans for Amititlan. ROE management is operating as if the contract has migrated and they are putting everything else in place that is required. They are making decisions on where to drill, which formations and all related work. There is a lot of planning. They have to prioritize locations as they have 600 locations, 200 in each of three (3) different formations. Craig Steinke was scheduled to go to New York this weekend for meetings with financial people
The real good news I gained was that all three formations can be brought into commercial production. The oil and gas are just bubbling out of the drill cores. I will post more on this later.