Mexico's upstream sector shows managed decline amid falling drilling activity

Mexico's upstream sector is entering a phase of managed decline, as a sharp drop in drilling activity, weaker exploration outcomes and a shrinking well base point to mounting pressure on future production capacity, according to newly released operational data.

Total wells initiated in 2025 fell to 78, down from 138 in 2024 and 217 in 2023, with both development and exploratory drilling contracting sharply, Pemex said in its 2025 annual filing to the US Securities and Exchange Commission.

Only 18 exploratory wells were initiated in 2025, down from 61 two years earlier, while discovered fields dropped to just two from eight in 2024, Pemex said in the filing. Although the exploratory success rate rose to 39%, the improvement reflects a smaller number of wells rather than a step-change in geological outcomes, with productive exploratory wells declining to seven from 17 in 2023, the report said.

Development drilling remains operationally efficient, with success rates holding above 90%, but at significantly lower volumes, according to the report. Development wells initiated fell to 60 in 2025, from 156 in 2023, limiting the sector's ability to offset natural decline through new production.

The contraction in activity is feeding through to the producing base.

The average number of producing wells fell to 5,637 in 2025, down 27% from 2021 levels, reflecting both reduced drilling and ongoing depletion in mature fields, according to the filing. Output per well, which had improved in recent years, also declined to 419 boe/d from 466 boe/d in 2024, suggesting early signs of productivity erosion, the report showed.

At the same time, drilling intensity has dropped sharply. The number of active rigs fell to 63 in 2025 from 94 in 2023, while total meters drilled declined by more than half over the same period.

Regionally, the data points to growing concentration risk. The northern region continues to dominate production, while activity in the southern region, historically a key contributor to national output, has declined significantly, underscoring the challenges of sustaining output across Mexico's legacy asset base.

Crude oil production decreased by 7% in 2025, mainly due to the natural decline of some of the main fields such as Zaap, Quesqui, Tupilco Profundo, Xanab and Pokche, the lag in the installation of marine infrastructure, Pemex said.

It also attributed the results to "unusual bad weather conditions that affected the continuity of offshore operations and delays in the completion times of wells with high complexity due to their depth, pressure and temperature conditions."