Oil Mergers Could Intensify Pressure on Smaller Players in Mexico

A wave of mergers and acquisitions (M&A) in the oil and gas sector has the potential of intensifying pressure on smaller players, a trend particularly challenging in Mexico where contractors face fierce competition, while dealing with significant payment delays from PEMEX.

Oilfield services M&A deal-making reached US$19.7 billion in the first nine months of 2024, the highest since 2018, according to Deloitte's 2025 Oil and Gas Industry Outlook. This consolidation is driven by companies seeking scale, supply chain rationalization, and adaptation to the evolving energy landscape.

The oilfield services sector, which reported US$155 billion in losses between 2015 and 2021, has shown signs of reversal in fortunes, cumulatively exceeding US$50 billion in net income over the past three years. This shift is attributed to innovation, cost-reduction measures, and a strategic blend of digital capabilities to deliver high-margin, lower-carbon solutions. Some oilfield services companies are also transitioning into "energy technology companies" by diversifying into low-carbon ventures like carbon capture and hydrogen generation. For example, Baker Hughes aims for approximately US$6-7 billion in new orders by 2030 from these new technology solutions.

Nonetheless, these mergers also place a significant pressure on smaller oilfield services which many times have to turn to acquisitions to survive. According to Citadel Financial Group, “[Mergers] are putting tremendous pressure on service firms (...) This shift has turned the industry into a buyers’ market, with oilfield services competing for fewer contracts and facing significant pricing pressures,” leaving companies to deal with “shrinking customer bases, rising costs, and a slowing market.”

In Mexico this scenario is even more challenging. Many small-sized companies could seek exits at favorable valuations, spurring further consolidation. This is compounded by an "unprecedented crisis" for oilfield service companies in Mexico due to a lack of payments from PEMEX. The Mexican Association of Oil Services Companies (AMESPAC) warned in a letter to President Claudia Sheinbaum that many companies may halt operations as early as July.

The Energy Workforce & Technology Council (EWTC) formally called on President Sheinbaum to address over US$1.8 billion in outstanding payments for 2024 and 2025 alone. EWTC's member companies account for more than 60% of PEMEX’s contracted oilfield services work. "Service providers cannot continue operating under such extreme financial uncertainty. We are not asking for special treatment, we are asking for fair treatment," wrote Tim Tarpley, President, EWTC. He emphasized that service disruptions could begin if the situation remains unresolved, directly impacting energy production in Mexico. AMESPAC also urged PEMEX to process and release invoicing for 2024 services, guarantee timely payments for 2025, and design a plan to settle all historical debts.

PEMEX's total outstanding debt to an extensive list of suppliers and contractors is around US$20 billion, in addition to a financial debt of US$101 billion. This comes despite billions of dollars in government injections over the past few years.

PEMEX’s overdue payments affect both small and large companies. Hokchi Energy, one of Mexico's largest private oil producers, has sought to change its contract to directly sell to PEMEX's commercial arm, PMI Comercio Internacional, due to months of delayed payments. The total debt PEMEX has with Hokchi Energy is around US$380 million. 

Oilfield service companies are already feeling the impact of a constrained market. SLB reported in its 1Q25 results a 10% year-on-year decline driven primarily by decreased drilling activity in Mexico. Innovex International on the other hand reported positive results derived from its Dril-Quip and DWS acquisitions but a sequential decrease was due to greater-than-anticipated weakness in Mexico and delivery delays in the US offshore business. In 1Q25 Innovex reported revenue of US$240 million, an increase of 88% year-over-year and a decrease of 4% sequentially.