Yesterday, Mexico’s state oil company, Petroleos Mexicanos – also known as Pemex, said it is looking for contractors to drill 200 oil wells in the country’s southern district as part of its efforts to offset declining output at existing wells. According to information released, drilling is scheduled to start in early October and last for 3 years.

Pemex has vowed to stick to its $20 billion capital expenditure target for this year, despite the sharp deterioration in the macro backdrop during the last few quarters (anemic demand coupled with growing supply overhang) and the resultant weakness in commodity prices.

The ambitious investment program has provided opportunities for oil services companies at a time when they are reeling from heavy exposure to the North American market.

Pemex confirmed that international oilfield service providers Incorporatedluding Halliburton Company (HAL), Schlumberger Limited (SLB), Baker Hughes Inc. (BHI) and Nabors Industries Ltd. (NBR) have all submitted proposals for the recent tender. Most of these companies are already established players in Mexico, an important market for all oil service companies.

We currently rate Halliburton, Schlumberger, and Baker Hughes shares as Neutral, while our recommendation for Nabors is Underperform.

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