Investor appetite for Petrofac hots up after Tabasco deal

SHARES in Petrofac defied stock market weakness yesterday after the energy services group said it had won two of the first three private oil production contracts to come out of Mexico in more than 50 years.

The 25-year agreements cover the Magallanes and Santuario blocks in central Mexico’s Tabasco state. These mature onshore fields have been operated by state-owned monopoly Pemex since the 1960s and together have almost 1,000 wells, of which about 100 are currently producing a total of 14,000 barrels of oil per day.

Under the terms of the deal, Petrofac, which has a major operational base in Aberdeen, will receive $5.01 for each barrel of oil delivered to Pemex. Mexico, the world’s seventh-largest producer, is attempting to tap into private sector expertise to reverse declining production from its existing fields.

Andy Inglis, chief executive of Petrofac’s newly created integrated energy services division, said the company was “delighted” at winning the competitive tender against the likes of Schlumberger, Halliburton and Repsol.

“Our integrated service offering, which does not involve the booking of reserves or the reporting of production, is fully aligned with Pemex’s requirement for a comprehensive long-term field development solution that enables it to retain full ownership and control of its own national resources,” said Inglis, the former head of BP’s exploration and production unit.

Drilling contracts such as those of Pemex are expected to become more popular as increasingly cash-strapped state-owned companies look for ways to boost production without selling their reserves. Petrofac will invest a minimum of $500 million (£302m) for a 90 per cent interest in the blocks, with a subsidiary of Pemex retaining the remainder.

Headquartered in London, Petrofac also has a training centre in Montrose. Shares closed up 35p or 3.1 per cent at 1,168p.