Gaining Access to Vital Integrated Services for New Operators

Q: What are the main problems in the Mexican oil and gas industry supply chain that Kratus Energy can help solve?

A: Mexico has an oil and gas industry but not an oil and gas market, so there are many opportunities for companies to come to the country and provide different services for all the value chain, from geophysics to production. Kratus is trying to bring different companies that can provide the various services needed in the energy market’s activities and work as a consolidating actor for these companies as they enter the country.

Kratus Energy's two types of clients are the companies we represent and the end customers, who are energy-related companies. If one of these needs production-pumping equipment, directional drilling services, or logistics, we will provide a solution. Market conditions have provided the opportunity to consolidate these groups because money is scarce at the moment in the oil and gas industry and by working together, companies can prove more costefficient.

Q: What are the unique characteristics of your business model, in which you bring together several service providers to offer integrated services?

A: We have the technical team and business acumen to bring to successful completion many types of projects based on more than 15 years of experience in the industry. Logistics will be the most difficult aspect for players working in Mexican fields, where they will have to deal with landowners, build roads, and be able to negotiate with the communities adjacent to exploration and drilling sites. Some of the companies we already have with us know how to deal with this, so half the work is already done for our end customers. Kratus can help a foreign company entering Mexico access all these services and consolidate them, and we can also help it establish an office in the country for its initial operations. We want to help companies come to Mexico and start their business as easily as possible. Kratus is able to provide the services large oilfield service companies offer at a considerably lower cost through the integration of specialty companies.

Q: What are the main challenges in ensuring that the services offered by Kratus Energy have more value than the sum of their parts?

A: Let us say that a company needs to hire a directional drilling contractor. If this company also needs to hire a service related to directional drilling, it might incur downtime until they can get the service. Kratus will provide the whole package, so our model allows solving problems faster due to our service consolidation. Our model is built in a way that allows companies to be able to collaborate with each other, since they are part of a chain. Being integrated makes it easier and it helps everyone save money and time, which is essential when drilling, or producing. Of course, a number of steps must be taken to position Kratus as the most efficient and cost effective solutions provider in the Mexican oil and gas industry, and the first step is the platform. The companies must then optimize operations in the right way so that we can provide the services on time with attractive prices and outstanding quality.

Q: How are you taking advantage of the entry of new operators?

A: Mexico went from a single client market to a multi-client market. As blocks are awarded, many more companies will come. The price of oil might not recover this year. Regardless, oil has to be produced and companies will do their best to do so. With this in mind, right now costs are the most important aspect for these companies, and the players that will enter the country will need someone to help them reduce costs. Kratus Energy has a unique formula for reducing costs that is built from years of experience working in the industry.

Kratus Energy will capture not a single company but create a significant mass that ultimately contributes to developing the domestic industry. Different sizes and different profiles are in fact our advantage, if properly managed. We envision private equity funds and other financial institutions ultimately becoming part of the platform in order to consolidate those projects that require outside investors.