May. 29, 2018


Javier Zambrano

Mexico

Javier Zambrano

CEO, Jaguar Exploración y Producción

“Our recently announced deal with Vista Oil and Gas brings many complementary advantages.”

BIO

Javier Zambrano joined Topaz in 2014 as responsible for Topaz ́s Energy Division. During this time Javier assembled a team of Mexican geoscientists and engineers to actively pursue and operate oil and gas opportunities in Mexico. These activities were later incorporated under Jaguar E&P, where Javier was appointed as CEO in 2017. Zambrano graduated with a BS in mechanical engineering from ITESM Monterrey and holds an MBA from The Wharton School, University of Pennsylvania.

What were the reasons behind the company's recent success in the second round of public auctions conducted by the National Hydrocarbon Commission (CNH)?

Jaguar E&P, since our incorporation, has had a clear vision: to become one of the leading companies in exploration and production (E&P) in Mexico. We are focused on mature, onshore fields. There is a huge opportunity due to Mexico's circumstances, particularly related to Pemex's financial constraints, which have left many fields under-developed. Jaguar was awarded several fields in the Burgos Basin and in Veracruz State and three fields in Tabasco. We have opened regional offices in these areas to operate the businesses with the support of local service companies.

Why did Jaguar Exploración y Producción decide to focus on mature, onshore fields?

From the outset, we were sure we wanted to become operators. This immediately ruled out the more expensive shallow and deepwater projects; targeting onshore mature fields made sense because there is less capital and less uncertainty involved. These (mature) fields, typically have existing seismic, well logs, and geological information which allow companies to make better estimates of resources and production curves. Second, the investments required are less capital intensive. Starting with fields with more information and easier access was the obvious route for us to become operators.

Is Jaguar Exploración y Producción looking to diversify its investors during this growth phase?

We are open to new investors. Currently we are grading the assets, proving some reserves, and ramping up production as quickly as we can. We want to get some cash flow from our operations and also prove to the market that our team is capable of running the operations efficiently. Our recently announced deal with Vista Oil and Gas brings many complementary advantages. Vista's management has a solid track record operating complex fields efficiently. Such capabilities significantly complement´s Jaguar´s subsurface competencies, enhancing the potential for the development of the assets. We are thrilled start working side by side Vista after CNH approves the transaction.

Why did Jaguar Exploración y Producción decide to enter an agreement with Sun God Energía de México, and why has this partnership been so successful?

We have a great relationship with Sun God. We faced the same issue wherein the royalties other companies were bidding in Round 1.3 for were too high. Our teams met up to discuss the opportunities in Mexico, Canada, the US, and Colombia; we have a great fit technically and on a personal level. When Round 2.2 came about, Sun God was willing to step into Mexico strategically and decided we were the right partner. We have the know-how of doing business in Mexico while Sun God has solid technical expertise. We hope to develop a bigger partnership going forward. Sun God has excellent Canadian operators and extensive knowledge on heavy oil, as well as secondary recovery through steam injection. These are skills we can use in other fields in future rounds, and we look forward to developing the partnership further.

What lessons have you learned from the auctions so far, and how will you adjust your strategy for future public bids?

We now have a solid and diversified platform. We have achieved diversification in three senses, the first of which is regional. Secondly, we have both oil and gas within our portfolio, and lastly, we have diversification in terms of the maturity of the fields. Some of our fields are already producing while others are in the exploration phase. All these mean we are in an extremely comfortable position that we can grow from. One of the main lessons learned was that the information from the data pack and the CNH has significant gaps. The more a company can learn about the geology of a field and how to operate on it, the better evaluation and bids it can do. The best lesson we have learned is that information is key to this business. In the following rounds we will have a more concise approach to what we like and how to assess the potential of each field.

What are the pillars of your innovation strategy?

Most of the fields we were awarded have never been developed with the proper use of technology. For example, the seismic data for some of the blocks is fairly old, and we can use new technology to upgrade and reprocess this, which will lower the exploration risk. There are also new completion techniques we can use in these fields to optimize flow and production. We can use lateral drilling to control the water in some of the reservoirs we have. There is a great deal we can do with these old fields, even with the basic technology that is out there.

Should Mexico invest in constructing new oil refineries and upgrading the existing ones or are there other priorities at the moment?

Refineries could be strategic part of Mexico's economy and a country needs some control over refined products. However, the best economic solution is probably not new state-built and run refineries. There must be an economic equation that allows private investors to re-build and efficiently operate refineries. Another option is the idea of buying refineries (or refining capacity) in the US where there is access to better infrastructure. It is always a balancing act for countries between supply, cost, and energy security issues. It is the same issue with gas. Currently, Mexico imports around 80% of gas consumed nationally, which is not necessarily ideal for a country.

What are your short-term goals for 2018?

We want to ramp up production. This is important not just because of the cash flow it will generate, but also to prove to the industry that we can get results and that we have a solid team behind us. This is important for our investors because in a few years we will likely continue to look for capital and strategic partners. A second major focus is to comply with all the regulations and have zero incidents in environmental, safety, or security terms. We are currently implementing several systems that will allow us to manage production better and comply more efficiently and automatically so we can focus our resources on what matters. We have to submit 11 exploration plans and seven development plans, which are fairly complex and comprehensive. Hopefully, we will finish proving up our reserves in early 2019, though most of that work is taking place now.

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