By February 14, 2017 Read More →

Alfa to sell oil assets in Eagle Ford, Peru, pauses energy spend


Alfa holds mineral rights in southeast Texas, Oklahoma, Kansas and Colorado.

Alfa CFO says company focusing resources on core business

MEXICO CITY, Feb 14 (Reuters) – Mexican conglomerate Alfa said on Tuesday 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.

Alfa’s Chief Financial Officer Ramon Leal said at a press conference the company was also looking at selling 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 United States in the face of the persistent fall in petroleum prices.

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

Earlier on Tuesday, Alfa reported a loss of 889.7 million pesos ($43 million) in the fourth quarter of 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 the fourth quarter of 2015.

Alfa posted revenue of 76.7 billion pesos for the quarter, an increase of 18 per cent 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 (NAFTA), raising the risk of a major economic shock for Mexico.

Even so, Alfa said car parts unit Nemak’s consolidated earnings before interest, tax, depreciation and amortization (EBITDA) performed well during the quarter, and reached an annual record in 2016, due to solid auto 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 per cent at 26.61 pesos per share before the company reported.

(Reporting by Natalie Schachar and Noe Torres; Editing by Lisa Shumaker)

Posted in: Energy Financial

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