From Seeking Alpha
Mexico is
gearing up for some significant oil reforms in an effort to revive its economy
in general and its oil and gas sector in particular. The country's energy
sector has been dominated by
Petróleos Mexicanos, also known as Pemex. With the new reforms, one of the
world's most restrictive energy markets could open its doors to international
energy firms. The oilfield services firms Schlumberger (NYSE:SLB) and Halliburton
(NYSE:HAL) could
be the first to capitalize on this development. The two were already eyeing
more than $8 billion worth of large integrated projects in Mexico. Analysts believe
that now is the time to buy Schlumberger and Halliburton on these new
developments. The new price targets on these firms represent a 30% upside.
Declining
Output
The
state-owned energy behemoth Pemex has been operating as a monopoly for seven
decades. The business has worked under service contracts with foreign firms, as
opposed to profit-sharing contracts. The absence of profit or production
sharing contracts has kept most foreign energy firms at bay. The country's
energy sector has suffered with falling levels of output due to a lack of
investment. In the last ten years, Pemex increased its annual investment by
five-fold to $20 billion, but its production fell
from 3.59 million barrels per day in 2002 to 2.93 million barrels per day in
2012.
