Petrofac closes sale of Mexican operations but plans legal action against Perenco

Oilfield services provider Petrofac has completed the disposal of its non-core assets in Mexico to Perenco, but the two companies have entered into a dispute related to this transaction.

Petrofac first sold a 49 per cent of its operations in Mexico to Perenco back in October 2018.

This included contracts for work on the Santuario and Magallanes onshore fields as well as the Arenque offshore field.

Later, in September 2019, Petrofac also sold its remaining 51 per cent stake in these operations to Perenco.

In an update on Tuesday, Petrofac said it has completed the sale of its remaining 51 per cent interest in its upstream IES operations in Mexico, including Santuario, Magallanes, and Arenque, to Perenco.

Perenco now owns a 100 per cent of the operations in Mexico.

This transaction largely completes Petrofac’s program to dispose of non-core assets.

Gross cash consideration received on completion was $82.7 million.

In total, Petrofac has received $120.2 million to date from the sale of its 51 per cent interest in its Mexican operations.

Proceeds from the sale will be used to reduce gross debt.

According to Petrofac, a further consideration of up to $155.8 million is potentially receivable.

This is comprised of $80.2 million, plus interest payable on completion, which is disputed by Perenco. 

Petrofac said it will initiate formal legal proceedings against Perenco to recover this balance.

Further consideration also includes up to $75.6 million contingent on future milestones, including field development, commercial, service contract transition, and fiscal terms.

The Magallanes and Santuario contracts were signed with Pemex for the increase of production and management of ongoing operations and maintenance and are scheduled to end in 2036 and 2042, respectively.

The contract for the Arenque offshore field is also with Pemex and has an end date set for 2042. The project is located in the Gulf of Mexico, 30 kilometers offshore from Tampico.

Petrofac also noted that the uncertainty surrounding the Mexican Energy Reform program and the outcome of other events is expected to result in a material non-cash impairment charge to be recognised at 31 December 2020.