International Frontier Upholds its First-mover Advantage in Mexico's Energy Reform
International Frontier Resources (IFR) was early to identify the oil and gas opportunities offered by Mexico's historic energy reform. IFR, through its joint venture (JV) Tonalli Energia ("Tonalli"), has now achieved its initial goals, in partnership with Mexican petrochemical leader Grupo IDESA S.A. de CV ("Grupo IDESA").
This strategic JV enabled IFR to be the first foreign company to:
Through its JV with Grupo IDESA, IFR became one of the first foreign companies to participate in Mexico's energy reform in the first bid round of the onshore blocks ("Round 1.3"). Moreover, it was one of the first foreign companies to be awarded an onshore oil and gas development block through a license contract.
The Tecolutla Project
On May 12, 2016, Tonalli Energia was notified by the National Hydrocarbons Commission (CNH) that it had been awarded Block 24 ("Tecolutla block") in Round 1.3, with an incremental royalty of 31.22%. Tonalli's royalty was modeled to allow for a competitive rate of return and compares favourably to royalties for other winning bids. On 10 of the 25 blocks, the incremental royalty was more than 60% with three of these blocks having incremental royalties in excess of 80%.
The Tecolutla block is a 7.2 km2 block in the Tampico-Misantla Basin located within the state of Veracruz. In 2017, HIS Markit identified Tampico-Misantla as a potential "super basin." The producing carbonate oil reservoir in the Tecolutla block is the El Abra formation. 3D seismic has been acquired over the entire block and seven existing vertical wells have been drilled by PEMEX to bring the field into production. On May 7, 2018, IFR announced that its JV has successfully and safely reached total depth at its first evaluation well, TEC-10. The TEC-10 directional development well was drilled to the target depth of 2,453 meters (total vertical depth, TVD, 2,490 meters measured depth).
Like many oil and gas fields in Mexico, International Frontier's technical team believes oil production from Tecolutla has yet to be optimized. To execute the plan, the team intends to deploy advanced carbonate drilling, completion, stimulation and recompletion techniques at the Tecolutla block.
Continuing analysis of wireline, imaging logs and core analysis will be utilized to verify the above interpretations, characterize the El Abra reservoir, refine the 3D seismic model, and identify the further potential of the Tecolutla block.
Partnering to be the Next Energy Leader in Mexico
IFR, through its Mexican subsidiary Petrofrontera, and Grupo IDESA formed a 50/50 joint venture company in Mexico "Tonalli Energia, S.A.P.I de C.V." This agreement and formation of Tonalli Energia represented a significant milestone for IFR, allowing the company to enter the Mexican oil and gas industry in partnership with a leading Mexican downstream corporation. IFR believes that the combined strengths of the JV partners are complementary in the pursuit of building a successful exploration and production company.
Through its JV, IFR has now entered the largest onshore bid round of the energy reform. Tonalli has registered and been granted access to the data room for the second tender of Round Three ("Round 3.2") of Mexico's energy reform by CNH. Please see the news release of May 9, 2018.