Debts squeeze Pemex; does not exclude offering guarantees with crude oil

Petróleos Mexicanos (Pemex), considered the most indebted oil company in the world and with a low credit rating, is analyzing how to deal with its heavy write-offs in 2023 and 2024, without going through the capital markets, its director said. Octavio Romero Oropeza.

For Romero, the capital markets punished the Mexican oil company despite the improvement in the figures compared to previous efforts, however, it should be recalled that the international rating agencies reduced the rating of Pemex to a degree that investors consider as a high risk.

mexican societya year 2022 closed with a financial debt of 107 thousand 700 million dollarsof which this year must pay some 8 thousand 200 million dollars and by 2024, an additional 9 billion in the form of bonds and long-term bank loans.

The figure for 2023 looks complicated, but if you add other liabilities such as revolving lines of credit, interest and other liabilities such as factoring (sources of funding) and repos (a buy and short-term sales), the sum amounts to 24 billion dollars. dollars that must be covered before the end of the year.

“We are exploring all (the options),” Octavio Romero told Reuters on Tuesday, and assured that the oil company is working closely with the Ministry of Finance, a federal agency that supported them in 2022 to cover the payments in the first quarter. . .

The official pointed out that the first option is to refinance the debts with the banks and in the event of not obtaining an agreement, did not rule out that Pemex could offer guarantees with crude oil. “We work without restrictions (…) we are ready to listen to any situation (option).”

Romero said Pemex would avoid returning to the debt markets after a costly issue in January. “Yes, yes, we will try to arrive at the best mechanism, at the least expensive”, he underlined.

The official complained, without giving names, about some risk rating agencies that ‘punished’ Pemex, and insisted that the Mexican government company had managed to stem the drop in hydrocarbon production , in addition to reducing financial debt and preserving proven reserves.

In 2020, Fitch Ratings and Moody’s Investors Service were the first major rating agencies to downgrade Pemex’s investment status.

Just in January 2023, Pemex placed $2 billion in 10-year bonds at 10.375% to refinance debt and after the federal government served as a lifeline with some $45 billion between capital injections and tax breaks over the past four years.

Pemex had in 2022 a slight profit of 1 thousand 187 million dollars despite the oil boom (due to the Russian-Ukrainian conflict) which allowed him to increase his income by 60%, with which he maintains the hope of not having to ask for help from the government of President Andrés Manuel López Obrador, who promised to “save her” at all costs.

Octavio Romero is confident that Pemex will be able to achieve crude and condensate production of 2 million barrels per day (bpd) by the end of 2023 or early 2024, despite the fact that on several occasions targets were not met, and the government itself adjusted from a cap of 2.6 million bpd when it began administration.

The official estimates that the objective will be achieved with the 37 fields that have been developed since 2019, which have brought in some 507,000 bpd and helped to partially offset the decline of other mature fields.

“We are already at a point where we are reaching or will reach the completion of the development of these deposits (…) the increase that we have already had, which is already more marked, is due to the fact that we already have a a lot of the infrastructure is done, we already have a good number of wells, we already have a plan for when we are going to drill,” he said.