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Mexico's Alfa preformance due to low prices force selling oil assets, halting energy Spending


Petroleumworld.com 02 16 2017

Mexican conglomerate Alfa said on Feb. 14 it will sell its energy projects in the Eagle Ford Shale in Texas, as well as its energy assets in Peru, while also stalling all energy investments due to lingering low oil prices.

CFO Ramon Leal said at a press conference that Alfa also seeks to sell certain oil service contracts in Mexico.

"We're focusing our resources in our core businesses and putting a permanent pause on our energy investments," Leal said, adding that he did not see oil prices rising any time soon.

Last year, Alfa said its energy services unit Newpek suspended some exploration and drilling projects in the U.S in the face of the persistent fall in petroleum prices.

Alfa holds mineral rights in southeast Texas—in the Eagle Ford and in the Edwards and Wilcox fields—as well as in Oklahoma, Kansas and Colorado. Newpek, which reports on Feb. 15, also works in mature oil fields in the eastern Mexican state of Veracruz.

Earlier on Feb. 14, Alfa reported a loss of 889.7 million pesos (US$43 million) in fourth-quarter 2016, hurt by a weak peso and lower operating results.

The company, which operates petrochemical, car parts and refrigerated food businesses, reported a profit of 162 million pesos in fourth-quarter 2015.

Alfa posted revenue of 76.7 billion pesos for the quarter, an increase of 18% from the same period a year prior.

But the performance of its Axtel telecoms business was negatively impacted by the weakness of the peso against the dollar, in addition to cuts in government spending that resulted in fewer projects.

The peso has been hit by repeated threats by U.S. President Donald Trump to scrap the North American Free Trade Agreement, raising the risk of a major economic shock for Mexico.

Even so, Alfa said car parts unit Nemak's consolidated EBITDA performed well during the quarter, and reached an annual record in 2016, due to solid automobile demand in North America and Europe.

Alfa also said a strong dollar benefited Nemak's sales in the fourth quarter.

Shares in Alfa closed down 0.67% at 26.61 pesos per share before the company reported.

(US$1 = 20.64 pesos on Dec. 30)

Story by Reuters.

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