Exxon’s (XOM) production problems are well known at this point. Output at the integrated giant continues to fall as costs for drilling and a badly timed bet on natural gas have hurt margins at the firm.
Which is why Mexico could be huge win for the company.
Exxon is a massive player in the Gulf of Mexico. So the natural extension of drilling past U.S. borders and down into the Latin American nation makes perfect sense. But more importantly, its drilling technology is some of the best in the world — thanks to that ill-timed purchase of XTO.
Since August — when President Nieto first began his quest to unlock Mexico’s energy — Exxon has been quite busy making deals with PEMEX. The latest of which is a five-year technical agreement that will see the two collaborate on drilling technology and human-resources training. While the agreement is “non-commercial” in nature, it’s still a big win for E&P giant.
Like Exxon’s deals in Russia, this deal with Mexico could give XOM the first-mover edge needed to get at the vast hydrocarbons before its competitors. That’s a key win for XOM as could finally boost its floundering reserve replacement ratios and future oil production.