Halliburton: Mexico's oil production decline rates will force a reactivation business

Halliburton, a U.S. oilfield services provider, said Tuesday that Mexico's declining oil production rates create pressure for a return to business amid the long delays by state-run Pemex in paying its suppliers.

Official figures show that the output of crude oil and condensate from Pemex, which is the largest producer, dropped 8.4% to 1.64 millions barrels per day in May.

Pemex is the most indebted oil company in the world. This has led to a significant decrease of activity by oilfield service companies.

Halliburton stated that issues related to Pemex payments have yet to be resolved.

SLB, a larger rival service company, said last week that the government and Pemex need to address key issues before a recovery can occur.

"We think we're there." "We're waiting to see the next steps to unlock the value of the assets in Mexico, and Pemex's dynamic to recover from this," SLB CEO Olivier Le Peuch stated during the company earnings call.

He added that SLB was ready to work with Pemex closely to resolve the issues.

The Mexican association of foreign oil service companies warned last month that some firms could have to cease operations as soon as July.

Pemex owes an additional $20 billion to a long list of suppliers and subcontractors, on top of its $101 billion financial debt, despite recent government spending of billions to cover amortizations.

In a June letter, the Mexican Association of Oil Service Companies asked Pemex for three things: to release and process billing for services rendered last year, to guarantee timely billing and payment for services in this year and to design a plan for paying all historical debts to companies within the sector.

The association stated that the oilfield services industry in Mexico has been severely affected by Pemex's failure to pay. It added that it will not be able guarantee operational continuity because of cash flow issues.

Halliburton's second-quarter earnings were announced on Tuesday. The company said that it expects international revenue for the full year to be down by mid-single-digits. This is primarily due to activity reductions in Saudi Arabia, and Mexico. (Reporting from Arathy S. Somasekhar in Houston and Tanay Dhumal; editing by Chizu Nomiyama, David Gregorio).

(source: Reuters)