Jaguar looks to raise capital early next year to develop Mexican onshore blocks - CEO

23 September 2020 - 05:07 pm UTC

by Carlos Martinez

Jaguar Exploracion y Produccion, a Mexico City-based oil company, plans to raise capital early next year to put some of the 11 onshore blocks it owns or has stakes in into production, CEO Warren Levy said.

 

The company, which is backed by energy-to-education conglomerate Grupo Topaz, estimates it will need “multiple hundreds of millions of dollars” to build up its reserves and production, he said. 

 

“Some of that capital would be able to be financed on a project basis and very likely we will go out and seek partners that have particular type of expertise,” said Levy. “We are discussing some of those opportunities now [because] we have one or two projects that we feel are getting mature enough to be there.”

 

Jaguar, which is working with Lazard, would like to strike deals to develop specific assets or else form a “more broad partnership agreement across multiple blocks,” the CEO said. 

 

This news service reported in November that the company was evaluating fundraising options for commercially developing 10 onshore oil and gas blocks.

 

Asked if the shift in Mexico’s energy policy towards a more nationalistic orientation could make it harder to raise capital, Levy said he does not expect Jaguar to struggle as it is a proven operator that is already drilling wells and ready to put some of them into production.

 

The administration of President Andres Manuel Lopez Obrador has canceled new oil-block auctions for private companies and asked state-owned Petroleos Mexicanos not to sign more risk-sharing contracts with other companies.

 

Jaguar won five onshore blocks and Pantera Exploracion y Produccion, its joint venture with Canada’s Sun God Resources, scooped another six in July 2017, in Mexico’s second-ever round of oil auctions, as reported.

It is a very gas-weighted portfolio, said Levy.

 

In May 2018, Jaguar farmed out 50% of its stake in three blocks to Vista Oil & Gas [BMV:VISTA; NYSE:VIST] for USD 27.5m, plus USD 10m in non-refundable investment carry, as reported.

 

“We did receive a premium over and above what we paid to acquire the blocks, which is attractive given the time from when we won the blocks to when we farm down to Vista,” he said.

 

Approaches from potential suitors of Jaguar’s blocks “picked up over the last month or so” following a quiet period during “the pandemic when everyone went into conservation mode”, the CEO said. 

 

Levy cited Tecpetrol, which “has been very good at squeezing value out of the Burgos” gas-rich basin in northeastern Mexico, as an example of a potential farm-in partner.

 

Buenos Aires-based Tecpetrol and local partner Industrial Perforadora de Campeche (IPC) operate the Mision block in the Burgos basin, which produced 111.3m cubic feet of gas a day in in July, according to government statistics. 

 

Jaguar is also looking to raise capital for exploration, which is more likely to be equity or equity-like capital because of the risk profile, said the CEO, noting the company still has cash in hand from its existing shareholders. 

 

It has drilled four exploratory wells and expects to complete three or five more wells before year-end, Levy said, adding that COVID-19 slowed down its drilling activity.

 

Jaguar expects to drill twice as many wells next year, noted the executive.

 

Its investments in exploration activities for 10 of its 11 blocks total USD 22.6m, or about 16% of its investment commitment, according to government statistics.

 

At the end of March, after Mexico’s oil industry regulator (CNH) announced it would suspend activities due to COVID-19, Jaguar asked for force majeure relief for the minimum work program for its 11 blocks, according to the country’s official gazette.  And in June, it requested an extension for its exploration and evaluation programs.

 

The regulator granted Jaguar and other oil companies an extension on its minimum work program less than a month later. The extension is for four months, noted Levy.

 

“We are pleased with the fact that the CNH has recognized the four months that it shut down,” he said. 

 

Jaguar now has until May to complete the minimum work program on three of its 11 blocks and until June on another three, according to government statistics.

 

The company does not rule out eventually launching an initial public offering (IPO) in Toronto, London or even Mexico, but “we don’t feel like the market is there right now”, said the CEO.

 

Mexico City-based Vista is still the only local oil company to have gone public. It raised USD 650m in its 2017 IPO.