Extension of Financial Opportunities to Medium-Sized CompaniesWed, 01/22/2014 - 12:46
Edmundo Gamas, Principal of Ultra Maris Capital, believes that PEMEX stands to benefit the most from the technology and funding capacity of the private sector in offshore oil and gas fields, shale oil and gas plays, and mature fields. Ultra Maris Capital’s clients are mostly medium-sized companies, many of which are interested in participating in the Mexican oil and gas industry, whether by operating fields or as part of the supply chain. For Gamas, one fact is certain: the market is about to open up for medium-sized companies. He believes that many shale fields and mature oil and gas fields, which he says are not as interesting for large firms, will provide suitable projects for these medium-sized players. As a boutique investment bank, Ultra Maris Capital has an extensive contact network with international institutional investors and capital market firms. Gamas sees his firm as being perfectly placed to secure the equity and debt financing that these players require to develop projects. “Mexican companies may not be as attractive to foreign institutional investors and capital market firms. However, securing financing for solid Mexican companies operating in the oil sector should not be overly difficult, as the perceived difference in risk between national and foreign companies will be small,” he explains. “Their unique logistical, financial, and technological flexibility gives them an added value in upstream activities. The characteristics inherent to these companies’ size enable them to work on a single or multiple wells, which would be unfeasible for major oil companies because of their need to generate returns on substantial amounts of capital.”
“Once the secondary legislation is in place, projects will be sequenced in the order in which SENER, CNH, and PEMEX prioritize them. We will be able to work on financing packages for our clients,” says Gamas. Prior to the Energy Reform, most of the companies that approached the investment bank were not interested in service contracts. Now, Ultra Maris Capital will definitely pursue opportunities in this vein, following its clients’ lead, to finance both operators and specialized contractors. As fiscal backup for its plans, Ultra Maris Capital has a long-standing relationship with international institutional investors and capital market firms that are ready to provide equity for oil and gas projects in Mexico. “We hope to integrate the financial package for several oil and gas developments in Mexico over the next few years,” comments Gamas. “The new legislation should also spell out a streamlined process for the participation of private parties. It should also decrease feelings of unease regarding risks in the oil and gas sector. For example, companies have been very demanding about the geological information they were provided as the basis for service contracts with PEMEX. With the new oil industry legislation in place, the risk-reward ratio is dramatically different. Companies are now more willing to take risks, which are needed to tap into the right opportunities.”
Gamas explains that these long-term and costly projects such as shale gas production make little sense at the moment given the price of gas imported from the US. “Mexican projects will have to be extremely lean and efficient in extracting shale gas and generate meaningful profits. One of the advantages the US used to develop its shale gas industry so quickly is the fact that huge pipeline networks already existed in this country. Mexico does not have similar infrastructure, which is crucial for a successful domestic shale gas industry. However, the industrial north as well as the automotive and aerospace industries in Mexico’s central regions are some of the energy intensive users that could benefit from a pipeline expansion,” says Gamas.