Oct. 29 (Bloomberg) -- Petroleos Mexicanos, the state-owned oil producer, said it may not renew two drilling contracts worth $870 million with Weatherford International Ltd. because it has sufficient equipment for next year’s drilling program.

“Considering the yearly work program for 2010 and the infrastructure we have contracted, Pemex has met its equipment needs,” Pemex spokeswoman Reyna Zea Delfin said in an e-mailed response to Bloomberg News when asked if it will continue using Weatherford’s drilling rigs and equipment after the contracts, known as ATG 1 and 2, expire in April.

Weatherford won the two contracts for a total of 600 wells at the onshore Chicontepec field in 2008. Chief Executive Officer Bernard Durac-Danner said in an Oct. 19 conference call that he expects “supplementary” drilling work with Pemex after the contracts end. Pemex, which reported more than $10 billion of losses since the beginning of 2008, is planning to spend a record $19.5 billion this year on production and exploration.

“Weatherford has a number of rigs completing in the second quarter of 2010, and the potential to recontract those rigs is poor,” Bill Herbert, an oil and gas analyst at Simmons & Co., said in an interview from Houston on Oct. 26.

Weatherford rose 11 cents to $17.91 as of 3:30 p.m. in New York Stock Exchange composite trading. Before today, the stock had gained about 65 percent this year.

Weatherford spokeswoman Christine Mathers did not respond to e-mails seeking comment on Chicontepec.

‘Release’ Rigs

Pemex may continue to “release” rigs as contracts expire and the company struggles to get funding for its drilling program, Pride International Inc. senior vice president of marketing and business development Kevin Robert said today on a conference call. Oil services companies seek to extend drilling contracts in countries in which they operate to avoid moving rigs and other equipment to other locations.

Mexican President Felipe Calderon is seeking to trim 218 billion pesos ($16.3 billion) from next year’s federal budget amid declining oil sales, which funded about 38 percent of last year’s government spending.

“Pemex has limited resources and needs to be selective in what they spend on,” Luis Flores, a senior economist at IXE Grupo Financiero SA in Mexico, said today in an interview. “Chicontepec has very difficult wells.”

Since 2007, Pemex has awarded at least $3.8 billion of contracts for the Chicontepec field, betting it would help offset falling output elsewhere. Pemex had an original Chicontepec target of more than 100,000 barrels per day for 2009, while September output was 29,907 barrels.

To contact the reporter on this story: Peter Millard in Mexico City at pmillard1@bloomberg.net.

Last Updated: October 29, 2009 15:31 EDT