On speaking to management yesterday I was advised that it is business as usual at ROE. Both of the Canadian and Mexican offices have everyone pretty much working from home. While a lot of their work has always been conducted by conference call they have simply increased the conferencing.
One real positive for ROE and its partners is that the oil price drop and the Covid 19 problem is putting huge, to the point of extreme, pressure from everyone and every direction on AMLO to change his policy of Pemex only. Romero, the Head of Pemex is pushing for partnerships as they know Pemex can’t do what has to be done on its own. Pemex does not have the money or the personnel with the necessary experience to do a lot of what needs to be done, such as development in deep water, shale development, etc.
These two huge events, while unfortunately damaging, should pressure AMLO into changing his position and policies.
While the news broadcasts say that Mexico is not doing much to combat the Covid 19 problem, the truth is that a lot of Mexico has been shut down for at least a month.
Virtually all oil drilling and related activity has been shut down for at least the next month or so. AMLO has not made oil drilling and oil related work an essential service.
CNH has shut down until April 20, and all Board Members and staff, if they are working are doing it from home. This will have no impact on ROE as it has all of the permits and approvals in place for the Chiapas blocks and any other work they had planned. However, at the moment, all activity has stopped for at least the next month. The stoppage of drilling and oil related activities is going to have a very big impact on Pemex. It is hard to discover new oilfields or develop the new ones with no drilling activity.
While the share price of ROE has taken a beating, so has the share price of most companies. The oil price drop will have some impact on ROE’s Revenues, but gas prices have not dropped as of this time so the natural gas revenue will remain good.
Management explained that ROE is in Mexico for the long term, and every body knew there would be challenges, so the work goes on as usual.
As for the Governments new energy policy and the start of the awarding of contracts, which has been promised for some months now, there has been no indication of any change in this area as a result of the oil price drop or Covid19. ROE, like everyone else, is still waiting for the announcements.
Management said that it is impossible to guess when the Mexican Government will move on this. The last commentary from the Government is that they would have the new policies in place and have announcements of awarding of contracts by the end of March. There has been no announcements changing that time frame and we have not got to the end of the month yet, but this is Mexico. Management stated they do not know when the Mexican government will announce the new energy policy or make announcements on the new contracts and could not give any indication of any specific day or time.