By Ben Bain
Aug. 21 (Bloomberg) — Mexico’s takeover of Oceanografia SA is proving anything but a rescue for the oil services provider.
Oceanografia, the provider of offshore services to the oil industry through a fleet of at least 50 ships, is spending more money each month than it’s bringing in, according to a company official who asked not to be named because the information hasn’t been made public. Just three of Oceanografia’s ships are active, the person said. The number of employees has dropped to less than 4,000, according to the person, from about 11,000 before the government’s seizure in February.
Federal officials made the case that Oceanografia was crucial to the nation’s crude output when they took it over following a $400 million loan-fraud allegation from Citigroup Inc. That importance was underscored last month when the state oil company Petroleos Mexicanos, known as Pemex, said its drilling was slowed in the second quarter because the government intervention impacted the use of Oceanografia’s ships.
“If you take away the owners and the top management who know the company inside and out, and you bring in people from the outside, even if they’re oil and gas experts, it’s going to take a while” to resume the former pace of operations, Marcelo Mereles, a former Pemex executive who is now partner at the Mexico City-based energy industry consulting firm EnergeA, said by phone.
When Mexico Attorney General Jesus Murillo Karam disclosed the takeover on Feb. 28, he told reporters that the government was moving “to protect the normal operation of a business that has a significant number of employees.” The government’s move came after Citigroup said it loaned $400 million to the company against collateral that didn’t exist.
Oceanografia was put under the administration of Mexico’s Asset Transfer and Administration Service, or SAE, a division of the Finance Ministry that’s also the primary agency for liquidating SUVs and jewelry seized from drug dealers and tax cheats.
Oceanografia and a press official for the Finance Ministry referred requests for comment to SAE, which didn’t respond to repeated questions about the company’s finances or operations. Pemex press officials declined to comment.
Amado Yanez, the Ciudad del Carmen-based company’s owner and former chief executive officer, was arrested earlier this year on charges of violating the nation’s credit laws. He was released in June after posting bail.
Oceanografia has missed payments on its $335 million of bonds due in 2015, which are now trading at 13.81 cents on the dollar, compared with 95.01 cents in January. The company’s most-valuable ship, the 591-foot-long OSA Goliath, was seized by the Norwegian trustee for a separate series of bonds due in 2018, and it’s now anchored off the coast of Aruba waiting to be sold.
The 2015 bonds were little changed at 13.8 cents on the dollar as of 8:57 a.m. in Mexico City.
Luis Maizel, who manages about $5.5 billion in fixed-income securities as president of LM Capital Group LLC, said the government takeover of Oceanografia was more designed to rescue the company’s assets than it was the company itself.
“They very quickly said that Oceanografia was of primary interest and needed by Pemex,” Maizel said by phone from San Diego. “They stepped in pretty quick and then said, ‘Now what do we do?’”
Last week, a judge ordered Pemex to refrain from canceling contracts with Oceanografia and to extend existing agreements. The order was sought by a government-appointed mediator to help the company maintain a regular source of income while in bankruptcy.
“It is evident that Pemex requires the services provided by this company,” according to the Aug. 15 order.
Gustavo Hernandez, Pemex’s head of exploration and production, referred to Oceanografia’s takeover during a conference call with investors on July 25, on which he discussed reasons for the company’s drop in oil output in the second quarter.
“You’re aware of a company that had problems and was the subject of an intervention,” he said. “That impacted the use of some ships used in drilling,” contributing to delays in meeting targets, said Hernandez.
Pemex output has declined for nine straight years.
Although Hernandez didn’t mention Oceanografia by name during the conference call, a press official confirmed afterward that he was speaking about the company.
“The SAE are not offshore oil and gas operators, so in that sense, learning about all the ins and outs is not easy,” EnergeA’s Mereles said. “How I would measure success in this whole operation is how fast the government can turn the company around.”
–With assistance from Adam Williams and Carlos Manuel Rodriguez in Mexico City.
Copyright 2014 Bloomberg.