Feb. 18 (Bloomberg) -- Seadrill Ltd., controlled by Norwegian billionaire John Fredriksen, executed four drilling contracts with Mexico’s state-owned oil company Petroleos Mexicanos as the country opens to foreign investment for the first time in 76 years.
Seadrill completed four shallow-water jack-up contracts and a fifth will be processed by the second quarter, the company based in Bermuda said today in a statement. Each contract has a 6-year term and total revenue potential from the five deals is valued at more than $1.8 billion, it said.
Seadrill’s contracts with Pemex, as the Mexico City-based company is known, follow legislation approved last year to open Mexico’s energy industry to foreign investment for the first time since 1938. By allowing foreign companies to operate in shale and deepwater fields, Mexico’s oil production is forecast to increase to 4 million barrels a day by 2025 from current output of 2.5 million barrels.
“Seadrill sees recent developments in Mexico such as new petroleum legislation, Pemex’s expansion plans and recent large deepwater discoveries as supportive to the great opportunity to expand business within the country,” the company said in the statement.
Pemex is in discussions with companies about potential joint ventures in deep waters in the Gulf of Mexico, Chief Executive Officer Emilio Lozoya said yesterday. Pemex, the third-largest oil exporter to the U.S., expects to announce deals by the end of this year or early 2015, he said.
Seadrill also said it will form SeaMex Ltd., a joint venture with an investment fund overseen by Fintech Advisory Inc. SeaMex will own and manage the Pemex jack-up drilling units, the company said.
Seadrill, which is adding the most new offshore rigs in the industry, needs $6.5 billion over the next two years beyond its cash flow from operations to fund its fleet expansion and dividends, said Brian Uhlmer, an analyst at Global Hunter Securities LLC in Houston, who rates the shares a buy and owns none.
“Anytime they can get an asset sale or a JV that helps them in that cause, it benefits them,” Uhlmer said. The five rigs will work for six years at more than $164,000 a day, which is a “solid” rate, he said.
Seadrill’s partnership with Fintech Advisory should give the rig contractor leverage for future negotiations with Pemex for additional work, said Scott Gruber, an analyst at Sanford C. Bernstein & Co. in New York, who rates the shares the equivalent of a hold and owns none.
Seadrill will have 69 shallow- and deep-water rigs, including 21 newbuilds by the time construction is complete in 2016.
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