Stagnating output hands Pemex its biggest loss in two years

Petroleos Mexicanos reported its biggest quarterly loss in two years as production growth stalled. Mexico’s Petroleos Mexicanos aims to balance its budget by 2021. Mexico’s Petroleos Mexicanos, the world’s most indebted oil company, will refrain from issuing new bonds this year. Pemex has more than tripled its estimated reserves in its Ixachi field.

Despite an accelerated drilling program at a group of onshore and shallow-water fields, crude and condensate production was 1.69 million barrels a day. Petroleos Mexicanos is accelerating efforts to bring on partners before an election. It must move towards a stock exchange listing like Saudi Arabia’s Aramco has done but that such a step would take years.

Revenue slumped in the fourth quarter, boosting Pemex’s net loss to 169.8 billion pesos ($8.8 billion), the biggest drop since the the same period in 2017. With its money-losing refineries producing the least fuel in 27 years and only a handful of private partnerships announced since Mexico’s energy reforms.

Earlier this month, Pemex’s bonds hovered near a record high on the expectation that production will continue to stabilize. It reverse a decade and half of declining crude production as early as next year. The peso and the company’s bonds fell on investor doubts that the steps will be enough. The company now believes the onshore field in Veracruz contains 1.3 billion barrels of oil equivalent in proven.

Pemex will be supported by the government. Pemex, as the company is known, will boost investment this year to 288. Without doubt this news will allow Pemex to contribute with more production in the future and stabilize the production platform. The Mexican state oil giant brought in a new head of joint ventures last week.

Pemex has already met almost half of its financing needs for this year after selling $5 billion in bonds in January. Carlos Trevino pointed to a call by the head of Mexico’s National Hydrocarbons Commission. Pemex is a few months away from closing an agreement for the project with a group led by Mitsui.

The Mexican driller, which is the world’s biggest borrower, was hit last year by a Fitch Ratings downgrade in June to junk. Trevino is due to step down from that role as President elect Andres Manuel Lopez Obrador takes office last Saturday. Pemex needs to perform a little bit better. A similar move by either Moody’s Investors Service or S&P Global Ratings could lead to Pemex’s removal.

The field is currently producing about 2,000 barrels a day of condensate. Pemex also expects to make an announcement in late July on three refinery joint-venture agreements. Trevino cited an improvement in Pemex’s compliance discipline as a step towards a possible market debut. The grade indexes around the world and a subsequent forced sell-off.

It will help Pemex increase the amount of fuels produced at its flagship Tula refinery by about 40 percent. AMLO won a landslide victory in 2018 after promising to root out Mexico’s endemic corruption. Mexico’s peso weakened 0.1 percent to 19.2834 per dollar as of 12:23 p.m. local time after earlier falling as much as 0.8 percent.

Mexico President Andres Manuel Lopez Obrador has placed Pemex at the heart of his ambitions to upend three decades of neoliberal policies. Pemex will invest 1.95 trillion pesos ($102 billion) by 2024. The yield on Pemex’s benchmark 2027 bonds rose seven basis points. Over the past several years, Pemex has failed to stem long-term production declines.

Pemex controls the majority of hydrocarbon reserves in Mexico although the sector has been open to foreign investment. It reducing the nation’s reliance on imports from the U.S. and elsewhere. The leftist leader’s plans for Pemex include the construction of a seventh refinery in his home state of Tabasco for about $8 billion.

It said in an emailed document ahead of the release of its business plan on last Tuesday. The front-runner for presidential elections scheduled for July. The consortium, comprised of Japan’s Mitsui and Cosmo Oil Co. The yield fell on Thursday in anticipation of the announcement. Pemex has struggled to increase its crude production, which is heading for a 14th consecutive year of declines.

Pemex is struggling to be profitable while balancing the need to finance the nation’s budget, which relies on it for nearly a fifth of its revenue. The state-owned firm is focusing on exploration in shallow and onshore areas. A historic symbol of Mexican national pride, Pemex has become something of an embarrassment after 14 years.

A victory by Lopez Obrador would “put at risk Pemex’s partnership projects. Those populist decisions are very difficult to implement if you have to share the equity of the company. While onshore and shallow-water fields helped the company boost production, Lopez Obrador has frozen competitive oil auctions.

That is evidently leading Pemex to try to conclude joint ventures before the change of administration. The temptations for the politicians are bigger if they do not affect any private interest in the company. The farm-out tenders that enabled Pemex to share the cost of developing oil fields with partners.

The project is one of the biggest investments by a private company in Mexico’s refining sector. The country ranks 130 among 180 nations in Transparency International’s Corruption Perceptions Index. Investors fear Pemex lacks the resources and technology to develop Mexico’s more complex deep-water.

Romero has sought to cut costs by renegotiating drilling service contracts. This plan will allow Pemex to avoid adding net debt, only to refinance existing debt throughout the year. The estimated investment to develop Ixachi field is 30 billion pesos for 40 wells. The Mexican-state oil company has stopped deep-water exploration.

But before the IPO can happen, the new projects Pemex is working on with international oil companies. Mexico imported the most fuel since at least 1990. It will reduce debt with higher cash flows from oil production until 2024. The exception of the giant Trion field in the Gulf of Mexico where BHP Group is the operator.

Pemex is the biggest borrower of any oil company, with $106.5 billion of debt. Lopez Obrador propounds a more nationalistic energy strategy than the current government. Pemex aims to reach an output of 1.95 million barrels per day this year. The joint venture between BHP and Pemex is the most advanced deep-water project in Mexico and first oil is expected in late 2024.

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