Scott Squires and Amy Stillman, Bloomberg News

MEXICO CITY
EnergiesNet.com 11 15 2023

Petroleos Mexicanos’ losses deepened and production dropped, complicating the oil explorer’s efforts to whittle down its hefty debt burden.

Pemex’s net loss widened to 79.13 billion pesos ($4.4 billion) from 25.44 billion pesos in the prior period, the company reported Friday, the worst result since the end of 2022. Crude and condensate production fell to 1.85 million barrels a day from 1.88 million in the second quarter.

Light crude production fell by 83,000 barrels a day from a year ago, while condensate rose by 192,000 barrels a day.

The results signal that government help for the state-owned oil producer hasn’t reversed the company’s financial decline. The administration of President Andres Manuel Lopez Obrador has been lavishing support on Pemex, granting the world’s most-indebted major oil company tax cuts and capital injections to no avail.

Pemex’s had outstanding debt of roughly $106 billion as of October, CEO Octavio Romero said on an earnings call Friday. Romero told lawmakers earlier this month the company would continue reducing debt through the end of the year. 

The company has around $700 million in bonds maturing through the end of the year, and plans to retire bonds maturing in 2024 with government support, Pemex executives said on the call.

Tax Relief

Mexico’s lower house of Congress voted last week to give Pemex even more tax relief than that proposed in the government’s 2024 budget. The company’s tax burden, which stood at 65% before AMLO took office, is currently 40%. In July, it received a $4 billion capital injection from the government.

It’s still uncertain whether such measures will lead to long-term financial strength for Pemex. Oil output has been declining for most of the past 20 years and the company’s refineries are dangerous, money-losing operations.

Pemex also has been plagued by a spate of accidents that prompted ratings agencies to warn of further downgrades after the company’s credit score was pushed deeper into junk in July.

A recent rally in Pemex corporate bonds has mostly cooled as investors grow increasingly weary of the government’s patchwork efforts to prop up the company, and concerns Mexico’s next president may be less supportive after AMLO leaves office next year. Spreads on Pemex bonds climbed in September to their highest levels in years, even after the company received a $4 billion government handout. 

Read More: Pemex Rally Fades as Traders Bet Mexico Aid Is Short-Term Fix

Pemex’s bonds due 2033 fell as much as 0.9 cents Friday to around 89 cents on the dollar, the biggest drop in nearly two weeks. 

The company is currently offering investors an exchange for its $2 billion in bonds due 2033. The offer expires Oct. 30.

bloomberg.com 10 27 2023