Mexico’s E&P Round One Kicks Off: Bidding Terms for Shallow … · 2018. 12. 31. · 1 Cuenca Salina 195 2 Cuenca Salina 194 3 Cuenca Salina 233 4 Cuenca Salina 233 5 Cuenca Salina

Legal Update

December 18, 2014

Mexico’s E&P Round One Kicks Off: Bidding Terms for Shallow

Water Areas Released

On December 11, 2014, the Mexican National

Hydrocarbons Commission (CNH) published the

bidding and contract terms for the first 14 oil

and gas areas in shallow waters, kicking off the

first phase of Mexico’s Round One, which will

continue throughout 2015. Although such

bidding and contract terms, which are available

at www.ronda1.gob.mx, only relate to shallow

water contract areas, they give us a general

insight into what the industry can anticipate as

to the legal and administrative framework for

participating in Round One.

Production-sharing contracts with 3 to 5-year

exploration terms will be awarded for the first 14

oil and gas areas in shallow waters pursuant to

economic criteria contained in the bidders’

proposals, based on a weighted formula that

includes consideration of the share of operating

profits offered to the State and a multiplier of

the minimum investment commitment per

contract area.

Non-Mexican companies may validly participate

in all phases of the bidding round pursuant to

the terms noted below. However, upon selection

of a winning bidder, the CNH may only execute

exploration and production contracts with

Mexican-incorporated commercial entities,

meaning that winning bidders that have

previously not formed a Mexican corporation or

other Mexican entity will need to do so at that

time. Pemex will also be able to bid by itself or in

association with others pursuant to the same

bidding terms.

Round One Calendar

The Round One bidding process will be divided

into the following five different phases:

Shallow waters (exploration);

Shallow waters (production);

Onshore

Chicontepec Basin and Unconventional

Resources; and

Deepwater.

Although subject to change, the Mexican

Ministry of Energy (SENER) has published the

following Round One tentative timeline:

BIDDING

INVITATION

DATA ROOM

ACCESS

Shallow waters

(exploration)

Dec. 2014 Jan. 2015

Shallow waters

(production)

Jan. 2015 Jan. 2015

Onshore Feb. 2015 Mar. 2015

Chicontepec

Basin and

Unconventional

Mar. 2015 Apr. 2015

Deepwater Apr. 2015 May 2015

Source: SENER

http://www.ronda1.gob.mx/

2 Mayer Brown | Mexico’s E&P Round One Kicks Off: Bidding Terms for Shallow Water Areas Released

The main features of the bidding terms for the

first 14 oil and gas areas in shallow waters are

summarized below.

Shallow Water Contract Areas

The 14 contract areas offered in the first phase of

Round One are located in shallow waters in the

Gulf of Mexico off the coast of the states of

Source: SENER

CONTRACT

AREA

GEOLOGIC

PROVINCE

AREA

(KM2)

1 Cuenca Salina 195

2 Cuenca Salina 194

3 Cuenca Salina 233

4 Cuenca Salina 233

5 Cuenca Salina 466

6 Cuenca Salina 466

7 Cuenca Salina 465

8 Cuenca Salina 116

Mexico’s E&P Round One Kicks Off: Bidding Terms for Shallow Water Areas Released

The main features of the bidding terms for the

first 14 oil and gas areas in shallow waters are

Shallow Water Contract Areas

The 14 contract areas offered in the first phase of

Round One are located in shallow waters in the

lf of Mexico off the coast of the states of

Veracruz, Tabasco and Campeche in southeast

Mexico. These are exploratory areas with

prospective resources that, according to SENER,

are expected to contain light crude oil with low

production costs. Each contract area is subject to

different minimum investment obligations.

MIN.

WELLS

TO BE

DRILLED

ESTIMATED

SEISMIC

COSTS (US$)

ESTIMATED

DRILLING COSTS

(US$)

ESTIMATED

EVALUATION

COSTS (US$)

2 $875,000 $109,560,000 $2,150,000

2 $900,000 $109,560,000 $2,850,000

2 $805,000 $100,200,000 $2,150,000

2 $900,000 $100,200,000 $2,850,000

2 $6,525,000 $80,000,000 $2,850,000

2 $8,300,000 $111,000,000 $2,850,000

2 $750,000 $89,800,000 $2,850,000

1 $750,000 $75,000,000 $1,425,000

Mexico’s E&P Round One Kicks Off: Bidding Terms for Shallow Water Areas Released

Veracruz, Tabasco and Campeche in southeast

Mexico. These are exploratory areas with

prospective resources that, according to SENER,

are expected to contain light crude oil with low

ct area is subject to

different minimum investment obligations.

ESTIMATED

EVALUATION

COSTS (US$)

ESTIMATED

TOTAL COST

(US$)

$2,150,000 $112,585,000

$2,850,000 $113,310,000

$2,150,000 $103,155,000

$2,850,000 $103,950,000

$2,850,000 $89,375,000

$2,850,000 $122,150,000

$2,850,000 $93,400,000

$1,425,000 $77,175,000


CONTRACT

AREA

GEOLOGIC

PROVINCE

AREA

(KM2)

MIN.

WELLS

TO BE

DRILLED

ESTIMATED

SEISMIC

COSTS (US$)

ESTIMATED

DRILLING COSTS

(US$)

ESTIMATED

EVALUATION

COSTS (US$)

ESTIMATED

TOTAL COST

(US$)

9 Cuenca Salina 116 1 $750,000 $55,500,000 $1,425,000 $57,675,000

10 Cuenca Salina 232 2 $900,000 $130,500,000 $2,850,000 $134,250,000

11 Cuenca Salina 309 2 $750,000 $146,400,000 $2,850,000 $150,000,000

12 Cuenca Salina 387 2 $750,000 $167,400,000 $2,850,000 $171,000,000

13 Cuenca Salina 501 2 $805,000 $109,560,000 $2,150,000 $112,515,000

14 Macuspana 310 2 $805,000 $111,000,000 $2,850,000 $114,655,000

TOTAL 4,222

Bidding Process and Calendar

The bidding and contract terms are not subject

to direct or private negotiation. Interested

companies are not to contact the CNH or any

other State entity involved in the bidding round

outside of the formal bidding process. Interested

companies may submit clarifying questions on

the bidding process and/or the bidding or

contract terms at any time starting on December

11, 2014. Based on the questions and feedback,

the CNH may revise the bid and contract terms

at least twice before they are deemed final. All

documents and correspondence will be in

Spanish (except where non-Spanish documents

are expressly permitted, as noted below), and all

official acts of the CNH during the bid process

will be conducted in Spanish by a bid evaluation

committee appointed by the CNH president. The

CNH reserves the right to modify the bidding

terms or cancel the bidding round at any time.

The phases of the bidding process are:

a. Publication of the bidding invitation and

terms;

b. Access to the information data room;

c. Clarification to the bidding terms and

contract;

d. Prequalification of companies;

e. Changes to joint bidders;

f. Delivery and opening of proposals; and

g. Contract execution.

Below is the general calendar included in the

bidding terms:

BIDDING INVITATION AND TERMS

EVENT DATE ADDRESS

Publication of the bidding invitation and terms 11/Dec/14 Official Daily Gazette and web sites:

http://www.dof.gob.mx

http://www.ronda1.gob.mx

Publication of updated bidding terms (including

contract)

13/Mar/15 http://www.ronda1.gob.mx

Publication of final bidding terms (including contract) 15/Jun/15 http://www.ronda1.gob.mx

http://www.dof.gob.mx/





DATA ROOM

EVENT DATE ADDRESS

Period to request access to the Data Room and

pay corresponding fee

11/Dec/14 to

16/Mar/15


Data Room Access 15/Jan/15 to

14/Jul/15

Insurgentes Sur 1228, Piso 10,

Colonia Tlacoquemécatl del Valle,

Delegación Benito Juárez. C.P. 03200

México, D.F.

CLARIFICATION TO BIDDING AND CONTRACT TERMS

EVENT DATE ADDRESS

First phase of clarifications (concerning data

room access)

11/Dec/14 to

25/Feb/15

Questions received

until 20/Feb/15


Second phase of clarifications (concerning

prequalification)

11/Dec/14 to

11/Mar/15

Questions received

until 5/Mar/15


Third phase of clarifications (concerning delivery

and opening of proposals, contract award and

decisions)

28/April/15 to

15/Jun/15

Questions received

until 1/Jun/15


PREQUALIFICATION

EVENT DATE ADDRESS

Period for registration payment and to request an

appointment for prequalification

11/Dec/14 to

16/Mar/15


Receipt of prequalification documents 11/Dec/14 to

31/Mar/15


Colonia Tlacoquemécatl del Valle, Delegación

Benito Juárez. C.P. 03200 México, D.F.

Prequalification period (document review by bid

evaluation committee)

11/Dec/14 to

23/April/15




Publication of the list of interested companies

that have prequalified to participate in the

bidding round

27/April/15 http://www.ronda1.gob.mx








CHANGES TO JOINT BIDDERS

EVENT DATE ADDRESS

Last date to request CNH authorization to

include possible financial partners that have not

prequalified in the joint bidder structure

20/May/15 http://www.ronda1.gob.mx

Last date to request CNH authorization to modify

the composition structure of joint bidders

10/Jun/15 http://www.ronda1.gob.mx

Last date to resolve any authorization to include

financial partners that have not prequalified and

for any changes to the joint bidder structure

15/Jun/15 This date will be communicated via email to

bidders

DELIVERY AND OPENING OF PROPOSALS

EVENT DATE ADDRESS

Delivery and opening of proposals and naming of

winning bidders

15/Jul/15 The date, time and place will be published at:


Resolution of the Governing Body for the

awarding decision and request to publish the

decision in the Federal Official Gazette

17/Jul/15 at the

latest




Deadline for the execution of contracts 21/Aug/15 Insurgentes Sur 1228, Piso 11,



Registration and Data Room Access

Interested companies must first register for the

bidding round in order to have access to the data

room. Additionally, only registered companies

will be able to submit their prequalification

credentials. In order to register for the bidding

round, interested companies must pay the

following amounts:

For data room access to information relating

to the 14 contract areas, MXN 5.3 million

(approximately US$350,000); and

For registration only, MXN 280,000

(approximately US$18,600).

This payment can be made via Internet or at a

Mexican bank. Paid data room access includes:

A hard disk containing the complete data

room information;

Visits to the physical data room

(appointment is required); and

Virtual access to the data room.

If the company paying for the data room access

intends to participate in the bidding round as a

member of a consortium, all of the members of

the consortium may have access to the data room

without having to pay an additional access fee.

After making the registration payment,

companies will be issued an identifying code

(Clave AD) to participate in the bidding round.

It is not necessary to have completed the

prequalification process to have access to the

data room.





Data Room Access

Registered companies must submit data room

access applications to CNH with documents

evidencing their legal existence and the legal

representative’s authority. Foreign companies

may request and be granted access to the data

room with such documentation translated into

Spanish and certified by a Mexican official

translator. In addition, companies must sign and

submit the confidentiality agreement included as

an annex to the bidding terms (Formato CNH-2).

Clarification Phases

There will be three different clarification phases

for the following topics:

Payments and data room access;

Prequalification; and

Proposals and bidding and contract terms.

Companies are not obligated to send clarifying

questions. The responses to the bidders’

questions will be made available to all bidders

and will be deemed part of the bidding terms

and thus must be reviewed and considered by

interested companies in addition to the original

bidding terms. Based on the questions and

feedback, the CNH may make modifications to

the final version of the bidding terms up to

June 15, 2015.

Prequalification

Companies must prequalify as a condition to

being able to submit proposals. Only registered

companies may be able to participate in the

prequalification process. The prequalification

process will concern technical, operational,

financial and legal matters. Supporting

documentation for the prequalification process

must be submitted in person at the time of a

previously scheduled appointment with the

CNH. When requesting a prequalification

appointment, companies do not need to specify

whether they will be participating individually or

in association with others. The bid evaluation

committee of the CNH will review the

documentation at the time of submittal. If

required documents are missing, the CNH will

not receive any documents, and the company

will need to request another appointment to

submit complete prequalification

documentation. The CNH will publish the list of

prequalified companies.

It is important to note that each bidding round

(shallow waters, extra-heavy oil, Chicontepec

Basin and unconventional resources, onshore,

and deepwater) is expected to have different

prequalification requirements. The

prequalification requirements relating to the

shallow water bidding process are noted below.

These requirements must be met by each bidder

participating individually, by the designated

operator if the bidder will be a consortium or

association, or jointly by all consortium or

association members, as noted below.


TECHNICAL AND OPERATIONAL EXPERIENCEAND QUALIFICATIONS OF AN INDIVIDUALBIDDER OR A DESIGNATED OPERATOR THATWILL BE VERIFIED

SUPPORTING DOCUMENTS TO EVIDENCE THETECHNICAL AND OPERATIONS EXPERIENCE ANDQUALIFICATIONS

1) Demonstrate experience as an operator

during 2010-2014 (regardless of whether the

specific project started before this period) in

(a) at least three exploration and production

projects or

(b) an aggregate amount of capital

investments in exploration and

production projects of at least US$1

billion; and

(a) Certified copies of contracts, concession titles or certified

copies of the cover pages of exploration and production

contracts (not including service contracts) or letters issued

by the regulatory authorities with jurisdiction over those

contracts or titles that evidence the required experience.

(b) In the case of companies listed on a stock exchange or

issuers of securities, submit annual report and Form 10-K

or Form 20-F as filed with the US Securities and Exchange

Commission, or any equivalent forms filed with similar

authorities in other jurisdictions that demonstrate the

required capital investments, or submit financial

statements certified by an internationally recognized and

distinguished independent auditing firm in which the

required investments are evidenced. If these documents are

not available or they do not evidence the required

investments, companies must submit a sworn statement by

the regulatory agency with jurisdiction over the relevant

operations, establishing the total required investment

amounts in exploration and production projects in which

the operator has participated, without being a requisite for

the operator to have directly made these investments.

2) Demonstrate experience as an operator or

partner in offshore projects. Must be the

operator in at least one offshore exploration

and production project or must have

participated as a partner in at least two

offshore exploration and production projects

within the last five years and

Certified copies of contracts, concession titles or certified copies

of the cover pages of exploration and production contracts (not

including service contracts) or letters issued by the regulatory

authorities with jurisdiction over the relevant operations under

those contracts or titles that evidence the required experience.

3) Demonstrate that the proposed personnel have

the required qualifications. Must demonstrate

that each member of the proposed personnel

for the key manager positions in charge of the

operations has at least 10 years of managerial

and operational experience in managing

offshore exploration and production projects;

and

Resumes of the personnel that demonstrate 10-year minimum

experience in managerial and operational positions in offshore

exploration and production projects and, taking them together,

performance of the following: design and execution of

exploration and production plans and approval of budgets

related to the investment and expenses of hydrocarbons

exploration and production projects. The following positions

shall be considered: project manager, operations director,

drilling director, production director, exploration director or

similar positions with similar duties.

Each resume shall specify the name of the companies in which

each member of the proposed personnel has worked, as well as

such member’s roles and responsibilities, years of service,

names of immediate superiors and contact information for a

person who may validate the information.


TECHNICAL AND OPERATIONAL EXPERIENCEAND QUALIFICATIONS OF AN INDIVIDUALBIDDER OR A DESIGNATED OPERATOR THATWILL BE VERIFIED

SUPPORTING DOCUMENTS TO EVIDENCE THETECHNICAL AND OPERATIONS EXPERIENCE ANDQUALIFICATIONS

4) Demonstrate experience in industrial security

and environmental protection within the last

five years. Must have experience in the

implementation and operation of industrial

security systems, operations security and

environmental protection in facilities or

exploration and production projects, such as

the following, without limitation: ISO 14001

(for the environment in general and

considering an external certification), API RP

75 (for offshore security; this one does not have

a certification requirement), IGS Code

(international code for security management,

applicable to moveable and jack-up platforms).

The system for managing industrial security and environmental

protection of the bidder with an opinion issued by a specialized

international firm indicating that the bidder follows

international practices for operations in offshore exploration

and production projects. The bidder must indicate its current

system type and the system to be used if selected as the winning

bidder, as well as the technical certification, inspections or

resolutions that it has and that evidence the required

experience.

FINANCIAL REQUIREMENTSSUPPORTING DOCUMENTS TO EVIDENCE FINANCIALQUALIFICATION

Must demonstrate the requirements of section 1 or

2 below:

1) Demonstrate:

1.1 Total assets with at least

US$10 billion in value, and

1.1 (a) In the case of companies listed on a stock exchange or

issuers of securities, submit an annual report and

Form 10-K or Form 20-F filed before the US Securities

and Exchange Commission or any equivalent forms filed

with similar authorities in other jurisdictions that

demonstrate the total assets indicated; or

(b) Submit financial statements certified by an

internationally recognized and distinguished

independent auditing firm that demonstrate the total

assets indicated.

1.2 An investment-grade credit rating by Fitch

Ratings, Moody’s Investors Service or

Standard & Poor’s Rating Services, or

1.2 The credit rating document must be issued by any of the

following rating agencies: Fitch Ratings, Moody’s Investors

Service or Standard & Poor’s Rating Services. Only the

credit rating documents issued by offices of these agencies

located in New York, London, Paris, Toronto or any city in

Mexico will be accepted. The documents must demonstrate

an investment-grade rating.


FINANCIAL REQUIREMENTSSUPPORTING DOCUMENTS TO EVIDENCE FINANCIALQUALIFICATION

2) Demonstrate shareholders’ equity of at least

US$1 billion. In the case of a designated

operator in a Consortium or Association

(Asociacion en Participacion)1, shareholders’

equity of at least US$600 million (as long as

the consortium as a whole meets the

conditions in section 3 below: “Additional

Financial Criteria for Consortia or

Associations) (Asociación en Participación).

(a) In the case of companies listed on a stock exchange or

issuers of securities, submit an annual report and Form 10-

K or Form 20-F filed before the Securities and Exchange


authorities in other jurisdictions, that demonstrate the

indicated shareholders’ equity; or

(b) Submit financial statements certified by an internationally

recognized and distinguished independent auditing firm

that demonstrates the indicated shareholders’ equity.

ADDITIONAL FINANCIAL CRITERIA FOR CONSORTIA OR ASSOCIATIONS

REQUIREMENTS SUPPORTING DOCUMENTS

3) If the operator does not meet the financial

criteria set forth in 1 and 2 above, the

consortium or association members must

demonstrate aggregate shareholders’ equity of

at least US$1 billion, provided that such

amount must be met with the equity of no

more than three consortium or association

members (including the operator).

(a) In the case of companies listed on a stock exchange or issuers

of securities, submit an annual report and Form 10-K or

Form 20-F filed before the Securities and Exchange


authorities in other jurisdictions, that demonstrate the

indicated shareholders’ equity; or

(b) Submit financial statements certified by an internationally

recognized and distinguished independent auditing firm that

demonstrates the indicated shareholders’ equity.

4) In the case of a consortium or association, the

operator must have at least 1/3 of the economic

interest in the consortium or association, and

no consortium members can have an economic

interest that is higher than the operator’s.

FORM CNH-4 – Private Agreement of Joint Proposal (Convenio

Privado de Propuesta Conjunta).

1 The “Asociación en Participación” is regulated by Articles 252 to 259 of the General Law of Mercantile Companies (Ley General

de Sociedades Mercantiles) and defined as a “contract by which a person grants a participating interest in the profits and losses of

a mercantile business or of one or more commercial operations to a person that contributes goods and services.”


Each individual bidder or consortium member

must also submit specific information relating to

the source of funds held, its corporate ownership

structure, management, tax returns, audited

financial statements, and other financial, legal

and corporate information as further specified in

the bidding terms.

The required legal documentation consists of a

certified incorporation charter, bylaws, legal

representative information and supporting

documentation, among others. Foreign

companies shall submit documents with the

corresponding apostille pursuant to the Hague

Convention of 1961 or under consular legalization.

The prequalification documentation must be

delivered in two different folders, one containing

the technical, financial and legal documentation

and the other containing the source of funds

documentation.

Proposals and Awarding of E&P Contracts

DELIVERY AND OPENING OF PROPOSALS

Only companies or consortia that have prequalified

may submit proposals. Proposals must follow

the specific instructions included in the bidding

terms. Proposals are to be made per contract

area. Each proposal must be comprised of two

different sealed envelopes, one containing the

economic proposal and the other containing the

bid bond (US$2.5 million standby letter of credit).

The economic proposal per contract area must

specify:

Share of operating profits offered to the state;

and

Multiplier of the minimum investment

commitment.

Together with the economic proposal, the

bidder must deliver a bid bond (garantía de

seriedad) consisting of a standby letter of credit

for the amount of US$2.5 million in favor of the

CNH and issued by a credit institution that has

legal operations in Mexico. The bid bond must

have an effective term of 60 days after the

delivery of the proposal. The purpose of the bid

bond (or “seriousness guaranty”, as referred to

in the bidding terms) is to guarantee the

execution of the contract by the winning bidder,

or the bidder in second place that is then

selected, and the delivery of the corporate

guarantee and performance guarantee under

the terms of the contract.

The proposal of the winning and second place

bidders will remain valid for 60 days following

delivery. Bid bonds of non-winning bidders will

be returned at the opening of the proposals,

except the second place bidder’s bid bond, which

shall remain valid for 60 days after submission.

The bid bond may be drawn by the CNH if the

winning or second place bidder withdraws its

proposal after the awarding of the contract, if the

winning or second place bidder is unable to

execute the awarded exploration and production

contract, or if the corporate guarantee and

performance guarantee for the exploratory

period as required by the contract are not

delivered to the CNH contemporaneously with

the execution of the contract.

All documents are to be presented in person by

legal representatives of the bidders.

The opening of proposals will take place in a

public act attested by a Mexican notary public

that will be live streamed via Internet. Bids will

be read out loud. The winning and second place

bidders per contract area will be publicly

announced in the same act. Minutes of the event

will be published thereafter.

ECONOMIC CRITERIA FOR DETERMINATIONOF WINNING BIDDER

The winning bidder per contract area will be

determined based on a weighted formula that

factors in the share of operating profits offered

to the State and a multiplier of the minimum

investment obligation per contract area:

V = (.90 x share of operating profits offered to

State) + (.10 x multiplier of the minimum

investment commitment.)


The multiplier of the minimum investment

commitment is calculated as follows:

Multiplier of the minimum investment

committee = [2,500 (additional investment)]1/2

In case of a tie, the winning bidder shall be the

bidder that, among the tied bidders, offers the

highest one-time cash payment to the State.

Such cash payments must be offered in writing

within 20 minutes of the declaration of the tie. If

the tie persists, the bidder will be chosen by a

random (insaculación) drawing among the tied

bidders.

Upon the publication of the final version of the

bidding terms (scheduled for June 15, 2015) at

the latest, the Ministry of Finance (Secretaria de

Hacienda) will determine the minimum

acceptable amounts for the two variables of the

economic proposal.

JOINT BIDDING GROUPS

Two or more companies may submit a joint bid

without having to jointly incorporate a legal

entity pursuant to the following rules:

The data room and registration fees need to

be paid by one of the joint bidders.

Joint bids may only be submitted by

prequalified joint bidders; no additional

company that was not part of the joint

bidding group at the prequalification phase

may be included in the joint bidding group

unless it has prequalified on an individual

basis and CNH consent is obtained. No

merger between bidders will be authorized.

No company can form part of more than one

joint bidding group.

No consortium member may have a

participating interest that is higher than that

of the designated operator.

The joint bidding group must enter into a

Form CNH-4 Private Joint Bidding

Agreement.

A joint bidding group may not include more

than one “Major Oil Company” (Compañía

Petrolera de Gran Escala), which

individually or together with its affiliates

had an average daily production of

1,600,000 barrels of oil equivalent in 2014.

Joint bidders may, but have no obligation to,

jointly incorporate a new legal entity to

perform the obligations set forth in the

Private Joint Bidding Agreement, provided

that they remain individually responsible for

those obligations.

CNH consent is required to add or remove

joint bidding group members after the

prequalification phase or to modify the

participating interest of any of the members;

otherwise, this would be a cause for dismissal

of their proposal. The CNH must grant

approval of the modification if the following

conditions are met: (i) the request is timely

made, (ii) no change of operator is proposed,

(iii) the designated operator’s participating

interest remains at 30 percent or higher and

(iv) no joint bidding member has a higher

participating interest than the operator.

CONTRACT AREA LIMITATIONS

Bidders may only submit one proposal per

contract area, directly or indirectly, either

individually or through a consortium or

association. Bidders may submit proposals for a

maximum of five contract areas.

PROPOSAL DISQUALIFICATION AND BIDDINGROUND CANCELATION

A bidder’s proposal may be dismissed when the

bidder does not follow the bidding terms and

rules, including if a bidder’s economic proposal

does not meet the minimum amounts set forth

by the Ministry of Finance.

The CNH will declare the annulment of the

bidding process, partially or completely, if

there are no proposals or qualified companies

or if all proposals are dismissed. The CNH

may cancel the bidding round at any moment

and for any reason.


RECOURSE

The only recourse to challenge the awarding

resolutions is the indirect amparo (juicio de

amparo indirecto), which is a constitutional

process to judicially challenge acts by executive

authorities.

EXECUTION OF CONTRACTS

The CNH may only execute exploration and

production contracts with Mexican-incorporated

mercantile entities that meet the following

criteria:

The entity is a tax resident of Mexico;

The entity’s corporate purpose is exclusively

the exploration and production of

hydrocarbons; and

The entity is not subject to the optional

consolidation tax regime (Régimen

Opcional para Grupos de Sociedades)

included in Chapter VI of Title 2 of the

Income Tax Law.

Any winning bidder or member of a winning

bidding group that is not a Mexican entity

must incorporate a Mexican entity for the

execution of the contract. In the case of a

winning bidding group, alternatively, all the

members may form one jointly owned Mexican

entity, which shall not include any different

owners and owership interests than those

originally included in the bid.

Simultaneously with the execution of an

exploration and production contract, each

winning bidder must deliver to the CNH a

corporate guarantee and a performance

guarantee. The corporate guarantee must be

granted by the ultimate parent of the winning

bidder, or, in the case of a consortium or

association, the ultimate parent of each of its

members, with the purpose of guaranteeing all

obligations under the contract, including all

payments to the State.

The performance guarantee consists of a standby

letter of credit issued by a Mexican bank to

guarantee the contractor’s obligation to carry out

the minimum work program during the

exploration period and its extensions. The

amount of the performance guarantee is not

established at this point but will be related to the

minimum investment obligations of each

contract area.

Contemporarily with the execution of the

contract, the winning bidder must also deliver to

the CNH the following documentation relative to

the Mexican entity that will act as the

contractor(s):

Incorporation charter;

Powers of attorney of its legal

representative; and

Other tax and corporate information, as

further described in the bidding terms.

If the winning bidder does not deliver the above

documentation or does not timely execute the

contract for reasons attributable to it, the CNH

may award the contract to the second place

bidder, provided it meets the awarding criteria

set forth in the bidding terms.

For inquiries related to this Legal Update,

please contact any of the following lawyers:

Dallas Parker

+1 713 238 2700

[email protected]

Jose Valera

+1 713 238 2692

[email protected]

Pablo Ferrante

+1 713 238 2662

[email protected]

Gabriel Salinas

+1 713 238 2622

[email protected]

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Documents

Mexico’s E&P Round One Kicks Off: Bidding Terms for Shallow … · 2018. 12. 31. · 1 Cuenca Salina 195 2 Cuenca Salina 194 3 Cuenca Salina 233 4 Cuenca Salina 233 5 Cuenca Salina