Mexico: CNH Publishes New Guidelines For Assignments, Corporate Changes, And Liens Regarding Hydrocarbon Exploration And Extraction Contracts

Published on Mar 9, 2023

Executive Summary

On March 8, 2023, the National Hydrocarbons Commission published Agreement CNH.E.89.010/2022, through which the Guidelines for Assignments, Corporate Changes, and Liens are issued.
The Guidelines apply to contracts for the exploration and extraction (CEE) of hydrocarbons and abrogate the previous guidelines that establish the requirements and the procedure to celebrate alliances or associations in which the transfer of corporate and management control or the control of activities, concerning the CEE of hydrocarbons.
The Guidelines will enter into force on March 9, 2023

On March 8, 2023, the National Hydrocarbons Commission (“CNH”) published, in the Official Gazette of the Federation (“DOF”), Agreement CNH.E.89.010/2022 through which the Assignment Guidelines are issued. , Corporate changes and levies ("guidelines").

The Guidelines apply to contracts for hydrocarbon exploration and extraction (“CEE”). In addition, they abrogate the previous guidelines that establish the requirements and the procedure to celebrate alliances or associations in which the transfer of corporate and management control or control of operations is carried out concerning the EWCs of hydrocarbons, published in the DOF on January 30, 2017, as well as its modification published in the DOF on December 17, 2020.

Relevant Aspects

The Hydrocarbons Law states that the CNH must authorize, in advance, any partial or total assignment of operations, corporate control of a Contractor ⁽¹⁾, and/or the rights conferred under the hydrocarbon EWCs.

Derived from the experience acquired by the CNH in recent years, these new Guidelines are issued in order to more efficiently regulate the review and approval procedure of the following "Procedures":

(i) The requests to accredit the legal, financial, technical, experience and execution capacities of the Contractors;
(ii) Requests for authorization to enter into alliances or associations in which the transfer of corporate and management control or control of operations is carried out;
(iii) Applications to levy liens on the Participating Interest and ⁽²⁾; y
(iv) Notices of modification of capital stock or Participation Interest.

Among the most relevant topics of the Guidelines are the following:

Regarding the application for the accreditation of capacities, the person who, about his EWC, intends to make an assignment, to be part of a Contractor or plans to modify the structure of the social capital, whether fixed or variable, of an individual Contractor or a Participating Company ⁽³⁾ and that implies the departure of the joint obligor, must request the CNH to evaluate the legal, financial, technical, experience and execution capacities of the potential assignee, potential contractor or possible joint and several obligors.
Regarding the requirements of the assignment request, the Contractor must submit a request for the authorization of a charge by filling out the forms and delivering specific information and documentation, tending to formalize the agreements of assignment of corporate and management control or charge of control of operations, as appropriate, and formalize the amending agreement to the EWC. In this sense, corporate and management control is not only limited to direct control but also includes indirect control up to the company's level through which the Contractor or the Participating Company has accredited technical and financial capabilities.
Regarding the notice of change in the structure of the capital stock of an individual Contractor or a Participating Company, which does not result in a transfer of corporate and management control, the CNH must be notified by filling out of formats and delivery of specific information and documentation. If said modification implies the departure of the joint and several obligors, the Contractor or the new joint and several obligors must certify that they maintain the same financial and, where appropriate, technical, experience, and execution capacities that the outgoing joint obligor accredited.
Regarding the notice of modification of the Participation Interest percentages between Participating Companies that make up a Contractor and that does not result in a transfer of corporate and management control or control of operations, notice must be to the CNH of its completion by filling out the forms and delivering specific information and documentation.
Regarding the request to encumber the Participation Interests, the CNH must grant its consent for the creation of a Lien ⁽⁴⁾ on part or all of the Participation Interest. The constitution of a CNH Lien will be carried out through specific information and documentation. Similarly, the Guidelines establish the need to notify the CNH regarding the formalization, modification, or termination of a Lien. In this sense, a definition of Creditor is included as the persons in favor of whom a Lien is constituted.
Inclusion of new formats for the information required for the Procedures presentation.

Each Procedure will be subject to the payment of the corresponding benefits and will have a specific procedure for the CNH to issue the respective resolution, counting the applicants with periods of rectification of the preventions that the CNH, if applicable, carries out. This is without prejudice to the fact that the CNH could deny any of the requested procedures.

The Guidelines will enter into force on March 9, 2023. However, the procedures initiated before the CNH before the entry into force of the Guidelines will be substantiated by the previous regulations in force at the time of the presentation of the corresponding procedure.

^Notes:

^{(1) Defined in the Guidelines as the person signing the Contract individually or Participating Companies or signatories of the EWC, jointly, as appropriate.}

^{(2) Defined in the Guidelines as the undivided portion of each of the Participating Companies in the rights and obligations of the Contractor by an EWC subscribed in consortium or joint venture. In the case of individual Contractors, their Participation Interest is one hundred percent (100%).}

^{(3) Defined in the Guidelines as each of the Signatory Persons of the EWC, including the operator, which together constitutes a Contractor.}

^{(4) Defined in the Guidelines as the legal act entered into between the individual Contractor or the Participating Company, as applicable, and the Creditor, through which an obligation to give, do, or not do concerning the Participation Interest is established, which may consist of in all types of guarantees in terms of the Guidelines.}

Authors

Juan Carlos Machorro
Partner
+52 55 5279 5463
jmachorro@s-s.mx

Norma Álvarez
Associate
+52 55 5279 5415
norma.alvarez@s-s.mx

Pablo Ortiz Mena
Associate
+52 55 5279 5499
pablo.ortizmena@s-s.mx