Some update on what has happened. I have been out of office and out of cell phone coverage the past few days.
I called and spoke to management this morning.
According to management ROE is still on the path to migration and the work continues.
Both Craig and Ian are in Mexico now and for at least this week and are working to obtain clarification and a full understanding of what has happened and are working on the migration of the contract.
It is expected they will put out a further news release once they have a clearer direction. It is anticipated that a news release should be at end of this week or early next week.
What I did find out is that there were 7 different contracts in the process of migration and Panuco for example had to migrate by a certain date and they needed a time extension and the only way to grant them a time extension without giving an extension on all of the others it appears was to stop the whole process for everyone and then restart with the ones they want to deal with. Pemex and gov’t want to migrate the Panuco contract (I think it is operated by Schlumberger).
All of these contracts under migration needed new approvals from the new Pemex CEO and Board. One could say the approvals, such as the approval for ROE given at this time last year had become stale dated. Since they all needed new approvals and since a couple where running up against timelines the easiest way it seems to solve the issue was to stop the whole process, as there a couple of blocks that Pemex did not want to extend or migrate. A couple of the blocks where with old time families who were connected to the old government who are not good partners for Pemex and have been basically living off Pemex and these types of service contracts. This apparently has become apparent to the new administration, so the cancellation of the process gets rid of them. The process for the ones they want can then be started again even though they never realy stopped.
Another aspect of the migration process is that Pemex cannot afford to give up any reserves that have been booked and can’t afford to give up production either for these seven blocks. The reserves are a real big issue in some of the contracts, but it is not an issue in the Amititlan contract.The reserves booked on Amititlan for the Chincontepec formation are small (Probably about 25 million barrels) compared to those booked on Latina or Panuco.
Pemex cannot afford and does not want to pay back the $46 million or so on the service contract, and it does not want to give up the Chincontepec reserves they have booked on Amititlan because of financing issues of Pemex. ROE has a solution for this issue for the Amititlan block.
I will explain this more in another post.