Deepwater Promise Cradles New VentureBy Pedro Alcalá | Wed, 08/26/2020 - 10:30
Q: What were the needs and incentives that you identified in the Mexican oil and gas industry that led to the founding of the company in 2019?
A: Two things motivated us to establish the company. One was the Energy Reform. The other was the oil price downturn of 2015, particularly its impact on offshore activity and on PEMEX. Our original intention was to build a fleet that could service the new companies expected to arrive into Mexico with new contracts. This fleet had to be composed of highly specialized vessels that were not common in Mexico and which had to be adapted to areas like deepwater work. Back then, deepwater in Mexico was limited to PEMEX’s activities in fields such as Maximino and Trion. We wanted to create a Mexican company that could cater to these new needs, and the company that we ended up putting together is indeed Mexican, but it also has global reach. The company had to focus on the acquisition, operation and administration of these highly specialized vessels with deepwater capabilities and the international required characteristics needed to service new international operators entering the Mexican industry.
By 2018, this idea had matured and in 2019 we started the creation of this company in a partnership with Riverstone Holdings, considered the most important energy focused private equity fund in the world. It manages considerable investments in Mexico in areas such as oil and gas exploration and production, renewable energy, midstream operations and service companies. Actually, we are the first service company to receive its support. We remain a 100 percent Mexican company and our fleet operates as a 100 percent Mexican fleet. However, we have already opened an office with operations outside of Mexico. This actually makes us the first Mexican ship-owning company with a global reach.
Q: How would you describe the acquisition and risk management strategies that led you to begin the configuration of your fleet with three new vessels?
A: The acquisition happened as a result of the problematic conditions of the industry. As the crisis in Mexico’s offshore sector extended beyond 2015 and continued to spike through late 2018 and early 2019, we noticed that during the times previous to the worst moments of these crises, companies with large amounts of liquidity began ordering the construction of many new vessels. This led to an oversupply of vessels once companies ran out of the money necessary to get some of those ships out of the shipyard and into operation for any project. This provided us with the opportunity to determine our acquisition strategy. This is why we acquired three new vessels from Asian shipyards whose construction had been originally ordered by other companies that could no longer pay for them. These are top-of-the-line vessels, which represent the most sophisticated of their kind operating in Mexico and the region. In fact, one of these three, which we received in May 2020, will be the most sophisticated deepwater vessel of its category soon to be working for international operators in Mexico.
The acquisition of all three vessels took place in August 2019. The first vessel was delivered in December 2019, and the third one will be delivered in August 2020. To sum up: we entered the vessel market in a bearish moment that allowed us to acquire premium ships at extremely competitive prices, and this allowed us to lower our risk as shipowners. We hope to make more acquisitions that will have quite an impact on the industry. This might go beyond the purchase of vessels and into the purchase of companies.
Q: How has CNH’s approval of an increasing number of deepwater development plans impacted your client and project portfolios?
A: It is important to note that many of these plans have not yet begun. Other operators began at earlier dates and have already made choices based on the results of their exploration. Some are in appraisal phases; others like BHP Billiton, are now entering field development phases. There are a variety of timelines and time frames going on in the Mexican deepwater sector. This includes all the delays that have been caused by the COVID-19 pandemic. Companies like BP, Equinor and Murphy were planning to drill this year but have delayed those plans to 2021 and in some cases to 2022. These delays do not affect us because we are using 2020 to ready our vessels for operation. If anything, it is possible that these delays will benefit us by further aligning our timetables with international clients. Shell is already our client; one of our vessels is working for them on a project in Trinidad. It is the operator with the most deepwater fields in Mexico, and it had a large number of exploration and development plans approved recently. Shell has played an enormous role in our portfolio. Other interesting potential clients that we are targeting include CNOOC and Petronas. Murphy has had significant findings and planned on drilling two appraisal wells and one exploration well this year. Those plans have been moved to next year but they are a sign that the players in this sector are very motivated and eager to continue with their work.
ENI is also a good example of this, although it gets more recognition for its shallow water projects in Mexico. We are also open to participating in those and other major shallow water projects, such as those managed by Hokchi, Fieldwood and Talos. Talos is a kind of brother company to us because of our connection through Riverstone Holdings, so there are synergies that both parties could benefit from. We could even think about future investments in the acquisition of vessels more specialized in shallow water work. However, our main focus is still in deepwater; not just in Mexico, but also in international projects in Guyana or Africa. We are not being erratic or random in our selection of these locations; we have a team of professionals that have between 30 and 40 years of experience with international operators in the offshore sector, and they play a large role in the selection of projects. In the short term, we are neither focused on nor interested in working for PEMEX, but we are definitely open to the possibility of doing so down the road.
Q: Considering development phases and time frames for Mexican deepwater fields, what are the main tasks that you expect your PSVs to be executing in support of international operators?
A: These vessels have a number of available functions. One is the transportation of large equipment or numerous quantities of materials, such as water, diesel and drilling fluids. They are equally equipped to transport liquid and solid commodities. What makes these vessels adept at completing these tasks in deepwater conditions is that the loading and unloading of these materials to and from deepwater installations are done under adverse environmental conditions that these vessels can withstand. These conditions can become quite common in certain weather conditions and places, such as winter in the Gulf of Mexico. The vessels can withstand these conditions thanks to their Dynamic Positioning (DP) and reference systems technologies. This can also include the handling of dangerous waste and toxic residual materials. They can also function as reliable standby vessels, meaning that they are able to remain independent near a deepwater platform in case of an emergency. There is enough space in these vessels for people to live if necessary. Today, the transportation of large liquid/fluids cargoes is what will most likely be requested by these operators.
Headquartered in Mexico City with an operational office in Houston, E-NAV Offshore was incorporated in July 2019 as a Mexican offshore support vessel owner and operator to service the Mexican and international offshore industry.