ENERGYALERT

April 11 th, 2018

The Development Path that have taken Pemex´s Farm - Outs in Mexico

By virtue of Round Zero, the Ministry of Energy (SENER per its acronym in Spanish), with the technical assistance of the National Hydrocarbons Commission (CNH per its acronym in Spanish), was the body in charge of assigning to Pemex 489 Exploration and Extraction fields (Asignaciones per its name in Spanish), where 108 are for exploration activities, 286 for extraction and 95 would remain assigned to Pemex until they are tendered by CNH through an open bid round process.

On August 15th, 2017 CNH released the results of its assessment on the Minimum Work Commitment for 103 Asignaciones, where it was shown that Pemex did not fully comply with these obligations. As a consequence of this, SENER decided to grant a two-year extension to the exploration period, in order to allow Pemex to comply fully with its Minimum Work Program commitments and been able to declare a commercial discovery. It is worth mention that if there is no declaration of commercial discovery by the end of this extended period, the Asignacion may not be transferred to the extraction stage and Pemex shall forfeit the Asignacion.

Derived from the above, and the economic situation that Pemex is under, it has been expected that many of the Asignaciones are migrated to Farm - out processes, where Pemex will be able to partner with other entities to carry out the required exploration and extraction activities, and be able to comply with the commitments acquired by virtue of Round Zero.Taking into consideration that one of the main objectives of the Energy Reform in Mexico has been the encouragement of foreign participation/investment in the Oil and Gas industry to boost the development of the country, Pemex developed a Farm Out program in 2016, that as of today, has continued with the migration of eight onshore Clusters in southern Mexico (Tabasco, Chiapas and Veracruz) and are formed by exploration and extraction Asignaciones with over 40 years’ of operation. These eight Clusters are the following:

► • Bacal – Nelash

► • Lacamango

► • Cinco Presidentes

► • Giraldas – Sunuapa

► • Bedel – Gasifero

► • Artesa

► • Juspi – Teotleco

► • Remolino

1During 2016 & 2017, the following events took place:• Asignaciones of Ogarrio, Cárdenas – Mora and Trión had already been migrated into Exploration and Extraction Contracts through a farm out process and a participation in said contracts have been awarded to different oil and gas companies, as partners of Pemex. • Pemex suspended the bidding process for the Nobilis-Maximino deepwater farmout due to the lack of adequate conditions to ensure participation in the process. • As of Ayin – Batsil shallow water farm out bidding process, no bids were submitted to the CNH due to the lack of adequate economic conditions. • Ek Balam was the first migration of an Asignacion into an Exploration and Extraction Contract where Pemex remained as the Operator and the only company carrying out the hydrocarbon activities

It is worth mentioning, that according to the last version of the Five Year Plan, the migration of six more Clusters into Exploration and Extraction Contracts have been requested by Pemex that together with all the aforementioned Clusters gives a total of 53 Asignaciones (1. Boluntikú; 2. Sinán; 3. Ayatsil, Tekel, Utsil; 4. Kunah, Pilikis; 5. Samaria; 6. Bacab-Ku-Lum-Maloob-Zaap)

In this regard, the chart below specifies in general terms the process carried out for a migration of Asignaciones to an Exploration and Extraction Contract regime:

Derived from the above, with this Farm Out program, Pemex is looking to increase the company’s total output to 2.072 million barrels per day. Also, if Pemex can successfully Farm Out this Clusters, an investment of approximately $4.6 billion dollars is expected during the life of the seven onshore Clusters.

Finally, it is worth mentioning that according to CNH data the exploration potential of the Clusters Bedel-Gasifero, Giraldas-Sunuapa, Juspi-Teotleco, and Artesa is promising, with a combined prospective resource of 443 million barrels of oil equivalent.

Below is a summary with the status of the migration process of Pemex Clusters to Farm Outs:

Upcoming Pemex Farm Outs

Cluster ´s name Asignaciones forming each Cluster

Date in which CNH approved the

migration

Type of partner that Pemex is

looking for

1. Bacal - Nelash

1. Arroyo Prieto

November 16th, 2017 Operator 2. Bacal

3. Nelash 4. Tiumut

2. Lacamango 1. Lacamango November 16th, 2017 Operator

3. Cinco Presidentes 1. Cinco Presidentes

November 16th, 2017 Operator 2. Rodador

4. Giraldas – Sunuapa

1. Giraldas

February 20th, 2018 Operator

2. Chiapas-Copano 3. Muspac

4. Comoapa 5. Sunuapa

6. Mezcalapa-04 7. Grijalva-01

5. Bedel - Gasífero

1. Eltreinta

March 5th, 2018 Non-Operator 2. Bedel

3. Gasifero 4. Tesechoacan-02

6. Artesa

1. Nispero

March 6th, 2018 Operator

2. Sitio Grande 3. Rio Nuevo

4. Artesa 5. Gaucho

6. Mezcalapa-08

7. Juspí - Teotleco 1. Juspi

March 6th, 2018 Operator 2. Teotleco 3. Mezcalapa-07

8. Remolino

1. Remolino

TBD TBD 2. Morelos 3. Hallazgo

4. Riachuelo

1) Bacal – Nelash

On November 16th, 2017, CNH presented its technical opinion in a favorable manner to SENER for the request for the migration on the following onshore Cluster which is located in the States of Tabasco and Veracruz, 70 km from the city of Coatzacoalcos, Veracruz to an Exploration and Extraction Contract.

Moreover on April 3rd, 2018 CNH approved SENER’s proposal of migrating both Asignaciones, into one single Exploration and Extraction Contract under a License model regime. As of the date, CNH has not yet published the dates in which this Farm Out bidding process will be launched.

General Information Asignaciones Arroyo Prieto, Bacal, Nelash, Tiumut

Type of activities Extraction Area 117 km2

Hydrocarbon type Crude oil API density 30°- 40° API Drilled wells 116

Upcoming Pemex Farm Outs

Cluster ´s name Asignaciones forming each Cluster

Date in which CNH approved the

migration

Type of partner that Pemex is

looking for

1. Bacal - Nelash

1. Arroyo Prieto

November 16th, 2017 Operator 2. Bacal

3. Nelash 4. Tiumut

2. Lacamango 1. Lacamango November 16th, 2017 Operator

3. Cinco Presidentes 1. Cinco Presidentes

November 16th, 2017 Operator 2. Rodador

4. Giraldas – Sunuapa

1. Giraldas

February 20th, 2018 Operator

2. Chiapas-Copano 3. Muspac

4. Comoapa 5. Sunuapa

6. Mezcalapa-04 7. Grijalva-01

5. Bedel - Gasífero

1. Eltreinta

March 5th, 2018 Non-Operator 2. Bedel

3. Gasifero 4. Tesechoacan-02

6. Artesa

1. Nispero

March 6th, 2018 Operator

2. Sitio Grande 3. Rio Nuevo

4. Artesa 5. Gaucho

6. Mezcalapa-08

7. Juspí - Teotleco 1. Juspi

March 6th, 2018 Operator 2. Teotleco 3. Mezcalapa-07

8. Remolino

1. Remolino

TBD TBD 2. Morelos 3. Hallazgo

4. Riachuelo

2) Lacamango

Also, on November 16th, 2017, CNH presented its technical opinion in a favorable manner to SENER for the request for the migration on the following onshore Asignacion which is located in the States of Veracruz to a Exploration and Extraction Contract.

Moreover, on April 3rd, 2018, CNH approved SENER´s proposal of migrating the Asignaciones into one single Exploration and Extraction Contract under a License model regime. However, CNH has not yet published the dates in which the bidding process will be launched.

General Information Name Lacamango

Type of activity Extraction Surface 16.26 km2

Hydrocarbon type Crude Oil API density 27.5° API Drilled wells 16 (11 producing and 5 shut down)

3) Cinco Presidentes

Likewise, on November 16th, 2017, CNH presented its technical opinion in a favorable manner to SENER for the request for the migration on the following onshore Cluster which is located in the States of Tabasco and Veracruz, 40 km east from the city of Coatzacoalcos, Veracruz to an Exploration and Extraction Contract.

Moreover on February 20th, 2018 CNH approved SENER’s proposal of migrating both Asignaciones, into one single Exploration and Extraction Contract under a License model regime. As of the date, CNH has not yet published the dates in which this Farm Out bidding process will be launched.

General Information Asignaciones Cinco Presidentes Rodador

Discovery Date 1960 1971 Type of activitty Extraction Extraction

Surface 138.7 km2 28.4 km2 Hydrocarbon type Oil Oil

API density 33.6° API 29.4° API Drilled wells 404 (30 producing) 90 (19 producing)

Production Average monthly production per well of

160 barrels of oil and 190 mcf of gas (as of January 2018)

Average monthly production per well of 150 barrels of oil and 180 mcf of gas (as of

January 2018)

4) Giraldas - Sunuapa

On February 20th, 2018, CNH presented its technical opinion in a favorable manner to SENER for the request for the migration on the following onshore Cluster which is located in the States of Chiapas, 35 km south from the city of Villahermosa, Tabasco to an Exploration and Extraction Contract.

Giraldas - Sunuapa Cluster

Asignaciones

Campo Giraldas

Campo Chiapas- Copanó

Campo Muspac

Campo Comoapa

Campo Sunuapa

Mezcalapa 04

Grijalva 01

Surface 124.6 Km2 102.6 Km2 108.3 Km2 72.1 Km2 212.4 Km2 1,452 Km2 229 Km2

Field Mid Cretaceous

Late Cretaceous

Late Cretaceous

Late Cretaceous

Late Cretaceous All geological formations

Type of activity Extraction Exploration

Original Volume

Oil: 464.6 MMbbl

Oil: 320.2 MMbbl

Oil: 163.2 MMbbl

Oil: 171.8 MMbbl

Oil: 427.8 MMbbl

N/A N/A Gas:

2,828.6 Bcf Gas:

2,226.6 Bcf Gas:

2,720.1 Bcf Gas: 215.3

Bcf Gas:

1,160.3 Bcf

3P reserves (January 1st,

2017)

Oil: 2.9 MMbbl

Oil: 2.8 MMbbl

Oil: 1.0 MMbbl

Oil: 1.7 MMbbl

Oil: 6.2 MMbbl N/A N/A Gas: 177.5

Bcf Gas: 11.9

Bcf Gas: 14.7

Bcf Gas: 2.7

Bcf Gas: 59.6

Bcf

Hydrocarbon type

Gas / Condensat

es

Gas / Condensat

es

Gas / Condensat

es Volatile Oil Oil

Gas / Condensat

es / Oil

Gas / Condensat

es

API density 42° API 44° API 54° API 32° API 31° API 31°- 54° API

31°- 54° API

Recovery factor

Oil: 37.6% Oil: 44.6% Oil: 47.4% Oil: 26.0% Oil: 11.5% N/A N/A Gas:

70.3% Gas:

66.8% Gas:

56.2% Gas:

44.8% Gas:

16.0% N/A N/A

Drilled wells 55 drilled

(10 producing)

30 drilled (8

producing)

35 drilled (6

producing)

11 drilled (4

producing)

37 drilled (10

producing) N/A N/A

5) Bedel - Gasífero On March 5th, 2018, CNH approved the migration request of the Bedel – Gasífero Cluster to an Exploration and Extraction Contract. With this in mind, Pemex is looking for a Non-Operator partner that contributes economic resources to the project that will consequently lead to a greater recovery of hydrocarbons.

The Bedel – Gasífero Cluster is formed by 4 Asignaciones located in the South Tertiary Basin of Veracruz and covers a surface area of 1,165 km2. Relevant information on the Cluster can be analyzed in the following table:

On April 3rd, 2018, CNH approved SENER´s proposal of migrating this Cluster into one single Exploration and Extraction Contract under a License model regime. However, CNH has not yet published the dates in which the bidding process will be launched.

It is worth mentioning that from the 7 Asignaciones that form this Cluster, 5 of them (i.e. Giraldas, Chiapas-Copanó, Muspac, Comoapa y Sunuapa) are Extraction blocks, while the last two (i.e. Mezcalapa y Grijalva) are Exploration blocks. The Asignaciones are bounded by a surface area of 1,724 Km2 and currently possess 37 production wells, in which gas and condensates are the predominant types of hydrocarbons.

Bedel - Gasífero Cluster Asignaciones Campo Eltreinta Campo Bedel Campo

Gasífero Tesechoacan

Surface 21.97 Km2 22.78 Km2 37.45 Km2 1165.6 Km2

Field Mid Miocene (sands)

Inferior Pliocene (sands)

Mid Miocene (sands)

Late Miocene (sands)

All geological formations

Type of Activity Extraction Exploration

Original Volume Oil: 163.6 MMbbl Oil: 217.5 MMbbl Oil: 133.3 MMbbl

N/A Gas: 218 Bcf Gas: 114.5 Bcf Gas: 384.8 Bcf

3P reserves (January 1st, 2017)

Oil: 27.7 MMbbl Oil: 23.7 MMbbl Oil: 18 MMbbl N/A

Gas: 109.8 Bcf Gas: 14.1 Bcf Gas: 133.1 Bcf

Hydrocarbon type Black Oil / Humid Gas Black Oil / Dry Gas

Black Oil / Dry Gas / Non -

Associated Humid Gas

N/A

API density 29° API 27°- 28° API 28°- 45° API N/A

Recovery factor Oil: 1.8% Oil: 1.4% Oil: 6.4% N/A

Gas: 2.5% Gas: 0.9% Gas: 16.1% N/A

Drilled wells 12 drilled (8 producing)

9 drilled (6 producing)

25 drilled (22 producing)

8 drilled (5 producing)

On April 3rd, 2018, CNH approved SENER´s proposal of migrating the Asignaciones into one single Exploration and Extraction Contract under a License model regime. However, CNH has not yet published the dates in which the bidding process will be launched.

It is worth mentioning that the form the 4 Asignaciones that form this Cluster, 3 of them (i.e. Eltreinta, Bedel and Gasífero) are Extraction blocks, while only one (i.e. Tesechoacan) is an Exploration block.

The Asignaciones are bounded by a surface area of 1,165 Km2 and the 3 Extraction blocks are inside the exploration area of Tesechoacan.

6) Artesa On March 6th, 2018, CNH presented its technical opinion in a favorable manner to SENER for the request for the migration on the following onshore Cluster which is located in the States of Chiapas, 35 km south from the city of Villahermosa, Tabasco to an Exploration and Extraction Contract.

Artesa Cluster

Asignaciones Campo Níspero

Campo Sitio Grande

Campo Rio Nuevo

Campo Artesa

Campo Gaucho Mezcalapa 08

Surface

54.5 Km2 121.3 Km2 23.6 Km2 52.3 Km2 60.4 Km2 870 Km2

Field Inferior - Mid Cretaceous

Pliocene, Late Cretaceous, Mid

Cretaceous

Inferior - Mid Cretaceous

Late Pliocene, Mid Cretaceous

Mid - Late Cretaceous

All geological formations

Type of activity Extraction Exploration

Original Volume

Oil: 479.5 MMbbl Oil: 1,152.6 MMbbl Oil: 245.4

MMbbl Oil: 191.4

MMbbl Oil: 45.9 MMbbl N/A

Gas: 484.6 Bcf Gas: 1,837.9 Bcf Gas: 392.6 Bcf Gas: 333.7 Bcf Gas: 136.4 Bcf

3P reserves (January 1st,

2017)

Oil: 8.7 MMbbl Oil: 0.4 MMbbl Oil: 0.8 MMbbl Oil: 2.8 MMbbl Oil: 2.8 MMbbl N/A

Gas: 16.7 Bcf Gas: 4.2 Bcf Gas: 2.3 Bcf Gas: 1.7 Bcf Gas: 7.4 Bcf

Hydrocarbon type Black Oil Black Oil Black Oil Black Oil Black Oil N/A API density 35° API 34° API 35° API 28°- 32° API 25° API N/A

Recovery factor Oil: 34.1% Oil: 31.7% Oil: 35.8% Oil: 31.3% Oil: 33.5% N/A

Gas: 55.5% Gas: 32.5% Gas: 46.2% Gas: 30.0% Gas: 41.9% N/A

Drilled wells 30 drilled (5 producing)

48 drilled (4 producing)

15 drilled (2 producing)

60 drilled (20 producing) (2 producing) N/A

Moreover, on April 3rd, 2018, CNH approved SENER´s proposal of migrating the Asignaciones into one single Exploration and Extraction Contract under a License model regime. However, CNH has not yet published the dates in which the bidding process will be launched.

It is worth mentioning that the first 5 Asignaciones (i.e.Nispero, Sitio Grande, Rio Nuevo, Artesa, and Gaucho)are Extraction blocks, while the last (i.e. Mezcalapa) is anExploration block. Additionally the CNH proposed to SENERto include the Cactus block in the migration.

The Asignaciones are bounded by a surface area of 870Km2 and have average recovery factors of 34% for oil and46% for gas.

7) Juspí - Teotleco Cluster

Also on March 6th, 2018, CNH approved the migration request of the Juspí – Teotleco Cluster to an Exploration and Extraction Contract. This Cluster is also located in the oil province Chiapas - Tabasco. The Asignaciones will be merged into one single block, which will be subject to a Farm Out bidding process for selecting a partner for Pemex. Some key facts may be observed in the following table:

Juspí - Teotleco Cluster Asignaciones Campo Juspí Campo Teotleco Mezcalapa 07

Surface 52.89 km2 182.98 km2 450 km2

Field Mid - Late Cretaceous Late Cretaceous and Inferior - Mid Cretaceous

All geological formations

Type of activity Extraction Exploration

Original Volume Oil: 39.9 MMbbl Oil: 393.5 MMbbl

N/A Gas: 175.1 Bcf Gas: 1,614.8 Bcf

3P reserves (January 1st, 2017)

Oil: 0.3 MMbbl Oil: 40.1 MMbbl N/A

Gas: 2.8 Bcf Gas: 306.5 Bcf

Hydrocarbon type Gas / Condensates / Oil Gas / Condensates Gas / Condensates

API density 42° API 40°- 50° API N/A

Recovery factor Oil: 29.19% Oil: 8.43% N/A Gas: 41.87% Gas: 8.55% N/A

Drilled wells 20 drilled (2 producing) 19 drilled (11 producing) N/A

Moreover, on April 3rd, 2018, CNH approved SENER´s proposal of migrating the Asignaciones into one single Exploration and Extraction Contract under a License model regime. However, CNH has not yet published the dates in which the bidding process will be launched. It is worth mentioning that the first 2 Asignaciones (i.e. Juspí and Teotleco) are Extraction blocks, while the last (i.e. Mezcalapa 07) is an Exploration block. Additionally the CNH proposed to SENER to reduce the area from 450 km2 to 282 km2 to avoid exploration activities near the Asignaciones Arroyo-Zanapa and the Cacho-Lopez.

8) Remolino

Moreover, on March 8th, 2018, CNH also approved the amendments of Asignacion Campo Remolino to adjust its surface area. Then, CNH approved the merger of Campo Remolino with several other Asignaciones (i.e. Campo Morelos, Campo Hallazgo and Campo Riachuelo) in order to form a Cluster that constitutes a complete geological column. However, CNH has not yet approved the migration of this Cluster.

Contacts:

Alfredo ÁlvarezMexico City Office - Energy Leaderalfredo.alvarez@mx.ey.com

Rodrigo OchoaMexico City Office – Oil & Gas Tax Leaderrodrigo.ochoa@mx.ey.com

Enrique Pérez GrovasNew York City Office - Taxenrique.perezgrovas@mx.ey.com

Javier Noguez Houston Office - Taxjavier.noguez@ey.com

Yuri BarruecoMexico City Office – Tax yuri.barrueco@mx.ey.com

Mario Karim Mexico City Office – Tax mario.karim@mx.ey.com

Jimena González de Cossío Mexico City Office - Legaljimena.gonzalez@mx.ey.com

Jeffrey HelmMexico City Office – Tax Modellingjeffrey.helm1@mx.ey.com

Rodrigo MondragonHouston Office – Tax Modellingrodrigo.mondragon@ey.com

EY | Assurance | Tax | Transactions | AdvisoryAbout EYEY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

How EY’s Global Oil & Gas Center can help your business The oil and gas sector is constantly changing. Increasingly uncertain energy policies, geopolitical complexities, cost management and climate change all present significant challenges. EY’s Global Oil & Gas Center supports a global network of more than 10,000 oil and gas professionals with extensive experience in providing assurance, tax, transaction and advisory services across the upstream, midstream, downstream and oilfield service sub-sectors. The Center works to anticipate market trends, execute the mobility of our global resources and articulate points of view on relevant key sector issues. With our deep sector focus, we can help your organization drive down costs and compete more effectively.

© 2018 EYGM Limited.All Rights Reserved.This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice.ey.com/oilandgas