Mexico’s Petróleos Mexicanos (Pemex) has “gained unprecedented help from the government during this administration,” CEO Octavio Romero Oropeza said in an earnings call.
During the call the company chief railed against credit rating agency Moody’s recent downgrade of the state firm. Moody’s said Pemex is likely to face increased financial stress in the next two to three years with $10.9 billion in debt payments due this year and another $13.7 billion in notes set to mature in 2026.
At the conclusion of 2023, Pemex had $107 billion in debt, according to company figures. This is compared to about $106 billion at the end of 2022.
Oropeza said Moody’s created “invented scenarios” in its downgrade and called it an “irresponsible” and “vulgar” move that would raise borrowing rates on the company. Moody’s needs to understand that “things have changed,” he said, referring to government policy vis-à-vis the firm.
The CEO said the government would provide Pemex a capital injection of 154 billion pesos, or around $9 billion, this year. The company’s profit sharing burden, known by the Spanish acronym DUC, would also be lowered to 30% from 40%.
He cited the fact that the finance ministry waived the DUC for a four-month stretch from October 2023 through January 2024. The move exempts Pemex from paying around $6.4 billion in taxes owed.
When prodded, management said they had not spoken to candidates about their plans for the elections and attitudes toward the state producer. Mexicans vote for a new president on June 2.
The company is also implementing a strategy to “accelerate payments to service providers,” Oropeza said. Payments amounted to 414 billion pesos, or around $24 billion, in 2023. There have been numerous complaints from major oilfield services providers of delayed payment in the sector.
He added, “for the second year in a row we are reporting positive results.” Pemex reported net income of 110 billion pesos in 2023, or around $6.5 billion, compared to 23 billion pesos in 2022.
Production Gains?
“In five years we have added 44 new fields,” to offset older field declines, Oropeza said. He added, “during 2023 and for the fourth year in a row, production grew compared to the previous year.”
Liquid hydrocarbons production averaged 1.884 million b/d in 2023, compared to 1.875 million b/d in 2022, management said.
The new fields are adding 571,000 b/d of liquids. Proved reserves remained steady at 7.4 billion bbl, Oropeza said.
Dry natural gas production dropped to 2.061 Bcf/d in 2023 compared to 2.265 Bcf/d in 2022.
Pemex overall natural gas production was 3.945 Bcf/d in the fourth quarter compared to 3.986 Bcf/d in the fourth quarter of 2022. The company is targeting a 98% gas capture rate by the end of 2024 from around 95% now at upstream facilities.
Refineries
Management said that the goal of the company was that Mexico reach “self-sufficiency in transport fuels,” a tacit recognition of the nation’s overwhelming dependence on imports of natural gas for electric power and industry.
Moody’s in its downgrade was harsh on the refining sector. “Moody’s expects that the refining sector will continue registering operating losses and continue to be vulnerable to demand trends for oil and gas in the medium term,” the credit agency wrote. “The company will face major business risks if it continues expanding its refining capacity and trying to increase its production.”
Management in the earnings call said the 340,000 b/d Olmeca refinery in Dos Bocas would be operating in “the coming weeks.” They added that the coker projects at Tula would be ready this year and at Salina Cruz next year. The Deer Park refinery in Texas continues its “positive results.”
Crude processing was 792,000 b/d in the country’s refineries in 2023, a drop compared to 816,000 b/d in 2022, basically due to repairs and maintenance work. Management said a focus at its refineries would be on reducing production of fuel oil.
