The government will provide a US$3.5 billion cash injection to PEMEX as part of a new business plan backed by President Andres Manuel López Obrador, who continues to make good on his vow to rescue the world’s most indebted oil company. PEMEX plans to use these funds to improve its financial situation by managing its liabilities and issuing new debt.
The NOC has reported a debt of approximately US$113 billion at the end of 3Q21. To offset its financial burdens, the company said it planned to implement several measures as a part of an overhauled five-year business plan, which includes offering new US dollar bonds it calls “New Money Securities”, buying back other bonds and paying current obligations. The New Money Securities will consist of unsecured PEMEX obligations, guaranteed jointly by PEMEX E&P, PEMEX Industrial Transformation and PEMEX Logistics, as well as their respective successors and assignees.
“Proceeds are expected be allocated initially to the offers to exchange, and any remaining proceeds will be allocated to the offers to purchase,” the NOC said in a statement.
PEMEX reported that its liability management transaction does not include outstanding PEMEX securities that mature in 2022 and 2023, this is because Mexico’s government already committed budget for a capital injection that would cover these maturities.
Mexico’s government has consistently backed up the struggling state oil company, nevertheless, industry insiders point out that this also means the government is increasing its control on the company. “There are opportunities at the micro level in several of PEMEX´s projects where we can obtain additional resources ... but without a doubt, the relationship between the Finance Ministry and PEMEX will be much closer,” said Rogelio Ramirez de la O, Minister of Finance in September 2021.
This increased influence represents changes, of which the reformulation of PEMEX’s 2021-2025 Business Plan from March of this year is a major part. Other than the work to improve PEMEX’s financial position, the new plan aims to “prepare PEMEX for the challenges the energy sector will face in the following years.” Other than that, the government wants to implement structures that allows for co-investment in exploration and production projects with the public sector, an improvement in the NOC’s debt structure and changes in the company’s structure and management, “aimed at achieving the necessary consensus within and outside of PEMEX.” As such, PEMEX’s recent creation of a new commercialization arm and appointment of a new interim CFO are considered part of these developments.