Rubén Cruz
Partner, Head of Energy and Natural Resources
KPMG Méxicp
View from the Top

Experience a Plus in ‘Energy Revolution’

Wed, 01/18/2017 - 11:38

Q: What role does KPMG play in the Mexican oil and gas market, especially given the Energy Reform?

A: This is not just an Energy Reform but an Energy Revolution. Many companies, both national and international, are arriving in a very short period of time. We can offer our clients experience and knowledge due to our activities around the world and in Mexico. KPMG has been active with PEMEX for 11 years, so we know it inside and out. We are aware of all the challenges and opportunities it faces in its transition from state monopoly to independent productive entity. Such a combination of knowledge and experience is hard to find in Mexico and we are happy to offer it as an added value to our clients.

Q: Looking at the winners of Round 1.4, how is KPMG positioned to work with and help them?

A: In the context of Round One, KPMG decided to follow the strategy of providing services to CNH during the pre-qualification period, by certifying that the bidding companies complied with all its defined regulations. To avoid any conflict of interest and due to CNH regulations, we could not provide any other service to the companies bidding in that round.

Round 1.1 brought Sierra Oil & Gas, while Rounds 1.2 and 1.3 brought enterprises like Pan American Energy and PetroBAL. Since we are no longer working with PEMEX, we can offer them our full range of services such as auditing, tax compliance, pricing transfer, expat management and booking, to name a few.

Q: Regarding local content, what challenges and opportunities do you detect in Mexico?

A: For the cutting-edge and expertise-intensive areas to be developed in Mexico, such as deepwater, most of the knowledge and people will have to come from abroad.

Nevertheless, the number of high-tech jobs performed by expats is nothing compared to the massive capital infrastructure investments that these companies are pouring into Mexican fields. Such investment will open up opportunities for local companies in the area of platform services, which is not knowledge-intensive but requires experience in the region as well as a local workforce.

Q: How can M&As fortify companies as they weather the end of the crisis and why should they choose KPMG?

A: M&A will take place mainly in upstream, with the companies entering the market. KPMG sees special potential for these relationships in the services area due to the newcomers’ lack of regional experience. Local companies are attractive acquisition targets because they have plenty of experience in servicing PEMEX and its suppliers. These local companies have many opportunities but they also lack capital.

To avoid missing those opportunities, they could play both traditional and nontraditional debt strategies. Such strategies range from acquiring private equity to being acquired in stages or using mezzanine debt to receive capital even if they have already used banking financial tools. Some local companies have a further challenge because they are family businesses, which tend to lack a proper structure, and will first need to employ corporate strategy tools. KPMG does not see all of the previously stated as problems but as opportunities that after being solved will allow local companies to grow.

Q: What are KPMG’s goals in Mexico and how is it preparing to achieve them?

A: KPMG has established a five-year goal of doubling its global size while also doubling the revenue from energy sector activities. KPMG has been working in this industry for several years in other regions and now Mexico has opened up an interesting opportunity to offer services to many new clients. We have worked with PEMEX for over a decade and are now committed to acquiring and investing in the right talent to serve the growing Mexican energy ecosystem.