Pemex to fine Weatherford for delays
Pemex is preparing to fine Weatherford International for missing deadlines on two oil drilling contracts awarded to the company last year.
Industry executives said Weatherford is in a tough spot because it underestimated the cost and difficulty of the two projects.
Weatherford agreed to drill a total of 249 wells last year in the geologically challenging Chicontepec basin, said a Dow Jones Newswire report.
Pemex said it is 34 wells short and penalties are on the way, according to information Dow Jones Newswires received from the state company. Pemex did not provide the amount of the penalties.
"There's not enough known about the reservoir. It's a very difficult situation they're in," said a Mexico-based oil executive.
The delays put Weatherford on uneven ground in one of this year's main profit centers for oil service companies.
Many oil companies in the US and Canada are slashing drilling programmes due to the oil price collapse, leaving companies like Weatherford with less work. Meantime, Pemex plans to drill twice as many wells on year with an ambitious $20 billion budget in an effort to reverse four years of declining oil production.
Weatherford won both contracts last year by bidding $870 million for a total of 600 wells. At the time competitors said it was 20% or more below other bids.
A 2007 drilling contract at the same field underscores Weatherford's ambitious pricing. In 2007, Schlumberger and ICA Fluor, a construction joint-venture between Mexico's Empresas ICA and Fluor, won a 500-well Chicontepec contract with a $1.4 billion bid.
Weatherford did not respond to an email requesting information. During a third quarter 2008 conference call chief financial executive Andrew Becnel described the 249-well programme at Chicontepec as a "moving target," and said Pemex was behind schedule on delivering drilling sites.
Pemex has consistently missed its production targets at the basin. A year ago, it expected to be pumping 100,000 barrels per day by now, but Pemex said on Wednesday that average output for this year will only be 72,000 barrels a day.
Critics are questioning the logic behind Pemex's decision to drill over 1200 wells a year there for the next nine years to get production up to 737,000 barrels per day. Until last year, Pemex never drilled 1000 wells a year in the entire country.
"We're losing money at Chicontepec," said opposition Senator Graco Ramirez at a Wednesday energy hearing. "We need to review this."
Ramirez suggested Pemex focus on other fields in the shallow waters of the Gulf of Mexico and on land.
Pemex boss Jesus Reyes Heroles expressed confidence in the company's output projections, but admitted it has been slow going.
"Pemex is at the very initial phase of the learning curve at Chicontepec," he told lawmakers.
Despite its problems, Weatherford is not running away from the challenge. Pemex announced two new 500-well tenders for the basin in December, and Weatherford has already bought the technical information for one of the contracts. Other interested oil service companies include Schlumberger, Baker Hughes, Halliburton and Nabors Industries.