Fieldwood Enters Bankruptcy; Cartel Boss ArrestedBy Peter Appleby | Thu, 08/06/2020 - 17:30
It was another dramatic week for the country’s oil and gas industry. First, the capture of Santa Rosa de Lima cartel leader José Antonio Yépez, better known as El Marro, was announced. Then came the news of the memorandum signed by President López Obrador, stating the potential countermeasures to the 2014 Energy Reform. On Thursday, news of Fieldwood Energy’s bankruptcy arrived.
All this and more in The Week in Oil and Gas.
Mexican security forces dealt a major blow against criminal gangs involved in the country’s highly-profitable and illegal huachicol market after the Santa Rosa de Lima cartel leader José Antonio Yépez, better known as El Marro, was captured this week.
El Marro’s rise has propelled a leap in violence in his home state of Guanajuato, where the Santa Rosa de Lima cartel has been fighting with Jalisco New Generation Cartel, the group suspected to be behind the attempted assassination of Mexico City’s Chief of Police Omar García Harfuch in June.
Huachicol has cost Mexico some US$6.5 billion in lost earnings over the last four years. The problem is so vast that at the beginning of 2019, President López Obrador ordered several major pipelines that crisscross Guanajuato and surrounding states to be shut, prompting mass fuel shortages in the country’s northern regions.
Fieldwood Energy Files for Bankruptcy
The global pandemic and industry-wide problems have forced Fieldwood Energy to apply for voluntary bankruptcy. This is the second bankruptcy the company has faced since 2018.
The operator, which won the shallow water Block 4 in Round 1.2 that holds an estimated reserve of 455MMb of oil, said in its press release that it “will continue to operate its business safely in the normal course during the pendency of the Chapter 11 cases and will continue working with its vendors, co-working interest owners and employees to support the operations.” The company has the liquidity necessary to meet its obligations during restructuring, according to a statement.
“Today's announcement reflects the next step in our efforts to respond to the challenging market environment and Fieldwood’s liabilities,” said Senior Vice President and CFO Mike Dane.
Fieldwood originally defaulted in May as it failed “to make payments on its first and second-lien term loans,” S&P Global reported. According to the Journal of Petroleum Technology, the company owes US$1.8 billion in debt. Fitch noted that the company “inherited substantial environmental liabilities versus onshore peers” due to its “focus on mature offshore assets.” Though “Fieldwood views its ability to efficiently decommission infrastructure as a competitive advantage … there is considerable variation around estimates for remediation costs, which could pose a risk to cash flows in the event of unfavorable fluctuations,” Fitch said.
AMLO’s Counter-Reform Suggestion Concerns Industries
The concerns of private players in Mexico were stoked this week after the publication of a memorandum dated July 22 and sent by President Andrés Manuel López Obrador to Mexico’s regulating bodies of the oil and gas and electricity sectors suggesting potential adaptions or a counter-reform to the Energy Reform passed in 2014.
The president, who has been a vocal critic of the 2014 reform since its inception and has argued that it condemns PEMEX in favor of profiting private interests, wrote that “if in order to apply the new rescue policy to PEMEX and CFE we need to propose a new Energy Reform, we do not rule out that possibility. That is, the option of presenting a constitutional reform initiative to Congress must be kept open to assert without a doubt the principle domination of the nation over its natural resources,” according to El Economista.