Drop in Demand for Seismic Services Leads Provider to Branch Out

Q: How did market conditions influence the development of Grupo Núñez during 2014?

A: Grupo Núñez was involved in very few projects during 2014. It was a very difficult year and we doubt this situation will change in 2015. We have supported our traditional client, COMESA, in the installation of all the hardware at its new processing center in Villahermosa. This kept us busy and gave us the opportunity to get involved in something that had not been done intensively in the past. However, factors like the drop in oil prices or the devaluation of the Mexican peso show us that the government was too optimistic when it announced the Energy Reform, especially for areas such as unconventional resources. The timeline will now have to be changed, resulting in delays for all kinds of projects. We were expecting the exploration phase for conventional fields to start up soon, as these projects will need seismic and related services. However, we anticipate this will be pushed back until the end of 2015 or the beginning of 2016. Therefore, we are trying to enter new areas besides exploration related activities and seismic surveys, which are currently in low demand.

Q: How has the company redesigned its strategy in order to keep active?

A: We have had to redesign our business strategy because our core business has always been exploration. When we saw the decline in demand for seismic services, we found ourselves needing to move away from our core business. Unfortunately, we are not technology developers, so our task was to detect existing technologies in different parts of the world and secure alliances with their owners to bring them to Mexico. Fortunately, we were well-received and several companies were impressed by our experience and market position in Mexico. As a result, our representation of foreign companies in Mexico has increased by 50% during the last year. We have already entered into an alliance with the Canadian company, ESG Solutions, in anticipation of certain services that could be required in unconventional areas, such as microseismic monitoring solutions. We have approached PEMEX, as well as companies that operate multiple service contracts or integrated service contracts, in order to provide these services, which can still be considered seismic services but with applications for production. We have also sealed an alliance with IHI to introduce nondestructive testing and to get involved in pipeline monitoring services. Ultimately, we are migrating toward downstream. The refining area needs to monitor pipelines that are part of an extensive complex, using guided waves and other ray inspection technologies, ultrasound, and other techniques. We also have an alliance with Process Instruments & Controls (PIC), a leading company in the measurement of hydrocarbons in the wellbore. We have carried out some pilot tests with PEMEX and companies that operate integrated service contracts in which we proved the efficiency of this technology. We are now waiting for these projects to start as we already brought the equipment to Mexico in order to conduct the tests.

Q: What negotiations have you had with CNH to date?

A: We have made ourselves available to CNH to provide geophysical data acquisition and we are awaiting its decision on this matter. We know that CNH is not interested in acquiring data for its own services, but we understand that it can open up opportunities to participate in multiclient projects or speculative work. We are ready to seize these opportunities with partner companies like Bell Geospace to acquire gravity data. Our vision is to acquire seismic and geological data on potential areas in which CNH allows us to work, and process and interpret this information. It seems that there will be an opening in this regard, although there are still some aspects to be defined

Q: What are Grupo Núñez’s ambitions when business picks up in the coming years?

A: We intend to provide support services in seismic and other areas such as production and refining. We are also considering relationships with international companies through our technology partners. Thanks to them, we managed to establish contact with some companies that have shown interest in participating in the blocks that are going to be tendered in the bidding rounds. We would eventually like to support them in the bidding processes or even partner up with them in these blocks. If we are unable to succeed in these partnerships, we would like to continue providing our services to these companies. These are the two goals we have in the aftermath of the Energy Reform.