PEMEX Successfully Completes Refinancing

The Ministry of Finance and Public Credit (SHCP) announced the conclusion of PEMEX’s short-term refinancing process, with analysts and rating agencies deeming the operation successful.

“This process included US$3.5 billion contributed by the Federal Government to promote the refinancing of PEMEX’s short-term maturities. The refinancing of the debt focused on exchanging bonds maturing in the short-term for a new ten-year bond. Additionally, part of the refinancing proceeds were used to buy back bonds that were at a lower price and maturing in the medium term,” reads an SHCP press release.

The operation reduced the company’s debt by US$3.2 billion and its financial pressure by US$10.5 billion. PEMEX’s rate differential, paid by 50 basis points over the sovereign rate, was compressed allowing a reduction of US$180 million in the financial cost per year. The public sector and PEMEX’s market debt were drastically reduced after the operation.

PEMEX is expected to achieve a significant increase in production for the first time since 2011. The company should achieve its goal of producing 1.82 million barrels per day, as experts believe that PEMEX will have a better 2022 after passing through difficult industry challenges, as reported by MBN.

“Adapting to a lower carbon, energy intensive market requires material investments in reducing direct and indirect emissions. PEMEX’s weak capital structure will materially limit the company’s ability to maneuver through energy transition,” said Lucas Aristizabal, Senior Director, Fitch Ratings.

These actions are not expected to affect any other economic sector, claims SHCP. “The Federal Government resources used in this operation do not put the execution of public spending at risk nor did they imply any budget cuts. The instruction of the President of Mexico is to support the oil company, which belongs to all Mexicans, and at the same time maintain healthy public finances and control public debt,” said SHCP.

SHCP previously announced that it was going to help PEMEX due to its importance in Mexico’s economy and job creation in the southeast region of the country. The ministry added that oil activity represents over half of total production and that the company employs over 1.3 million people, as reported by MBN.