Oilfield Services Drive Production in Mature Fields

Q: ITS Energy Services was recently awarded a contract with Pemex in its onshore northern region. Which services will iTS be performing under the terms of the contract and how long will it last?

A: ITS won a 24-month contract with Pemex to provide casing running services. We will be responsible for introducing all the casing, torqueing up and setting casing for Pemex in their northern region. There are currently nine rigs in place at these fields, of which two are workover rigs. The rig count is expected to increase throughout 2012, but that has yet to be confirmed. These rigs cover the northeastern area, Burgos and beyond the Tamaulipas border into Coahuila.

We were hoping that Pemex would tender extra services, which they did, but unfortunately due to certain companies in the market under-bidding on the contracts, Pemex declared seven of the 10 tenders void. The contracts that were not voided were not interesting for us from a financial perspective. We hope that in the months to come, the voided tenders will be relaunched, as they will be necessary to fulfil the services that these nine rigs require. We also expect further services to be introduced in the region that ITS would be extremely interested in, including tubulars, drill pipe rental, downhole tools, pressure control equipment, fishing and re-entry, but these are yet to be determined. However, we are happy to see a pick-up in business at our Reynosa facility, because it has been ITS’ weakest market for considerable time now.

Q: What was the company’s entry strategy into the Mexican market?

A: We reasoned that Villahermosa would be the sensible place to start in Mexico, after looking at the market and the needs of Pemex. The business we decided to start in was oilfield equipment, downhole rental tools and pressure control equipment. Shortly after, we started setting up operations in Poza Rica and Reynosa simultaneously. These are three completely different markets, each one asking for different types of services and different equipment.

Q: How will advanced machine manufacturing facility that ITS is establishing in Poza Rica enhance the competitiveness of ITS?

A: In recent years, Pemex has worked hard to increase the standards they demand from their oilfield service partners and are beginning to request equipment manufactured and certified by machine shops with an API license. This gives us a competitive edge against all other machine shops in the area, including in Villahermosa. On top of that, we are also working on our quality control systems and we will also be applying throughout 2012 for an API Q1 license. Baker Hughes, Schlumberger and Halliburton are all in the process of moving from an API onto a DS1 inspection standard and they are beginning to invest heavily in more certified equipment. Post-Macondo, a lot of attention has been given to the quality of the equipment, from traceability to certification, so we are hoping that this will play to our favour in Mexico.

We are confident that the northern region project will be good for us in terms of bringing repair and manufacturing work to our three facilities in Poza Rica, Reynosa and Villahermosa. Right now, iTS is manufacturing downhole components for Halliburton in Houston, and exporting the finished products to Mexico. By setting up a machine shop in Mexico, we will be much closer to our clients in the country.

Q: What are your expectations for Pemex’s appetite for new technology introduction in 2012, and what is your outlook on the development of the market for ITS?

A: Pemex is definitely hungry for new technology. Rather than developing technology, they rely on international companies to propose new ideas and I must admit that they are always open and welcome to at least hear proposals from us. At a corporate level, our research and development efforts are paying off and we are now manufacturing whipstock units and drilling jars that are designed by our in-house engineering department in Houston.

After the 2009 and 2010 slowdown, Mexico is steaming into 2012. After following our gut feeling and taking a financial risk with our aggressive capacity building investment over the past years, we are confident that our confidence in the Mexican market will certainly pay off.