Texas oil and gas drillers and field service companies of all sizes could find “grande” opportunities south of the Rio Grande. After years of government-run PEMEX having a Mexico monopoly, the country is slowly opening up to foreign investors who know how to drill unconventional wells.
That means horizontal drilling, hydraulic fracking—things Texas companies have been doing for more than a decade. “There are no Mexican fracking companies,” said Marcelo Sada, an investment banker and vice president at Allegiance Corp. in Dallas. “Mexicans could buy the technology from U.S. companies or Texas companies could expand business south of the border in the same landscape.”
The Eagle Ford Shale in south Texas has given Texas a massive boost in oil production in recent years. “It’s basically an extension just south of the border with little competition,” Sada said. Allegiance Capital is on the front lines of M&A activity in the energy sector domestically and internationally, where fracking know-how is needed.
While the big major companies Irving-based Exxon Mobil Corp. (NYSE: XOM) will move down there there’s just as much opportunity for the small and mid-size companies to take over the exploration and development of shale plays in Mexico.
For decades, Mexico had a nationalized oil and gas company, PEMEX, that handles exploration and production in the country, typically going after conventional reserves. Other companies had to be subcontracted through PEMEX.
Laws have changed in recent years that are slowly opening things up for foreign companies and investors. More political changes need to be made before it’s a done deal. “Now, they actually have an opportunity to have an upside,” Sada said. “The government has reached the point where they’re providing economic incentives for others to produce those areas.”