Mixed Bag for Privates as PEMEX Sees Heavy Q2 LossesBy Peter Appleby | Thu, 07/30/2020 - 17:48
Though not unexpected, companies in the global oil and gas industry have struggled this week. Second quarter losses crystalized the difficult environment of the last three months as stringent social mobility measures allowed fewer cars on the roads and reduced demand for fuels.
However, the industry must go on and next quarter should offer a glimpse into the upward trend that consumption is predicted to see.
The Mexican NOC lost another MX$44.3 billion (US$1.93 billion) in 2Q20, hot on the heels of the historic US$23 billion loss reported in 1Q20, 16 percent less than the US$2.4 billion loss seen in last year’s first quarter.
The source of PEMEX’s problems is not hard to find. Plunging fuel sales amid the pandemic dented the company’s ability to generate cash while the prolonged peso devaluation and production falls abetted by the OPEC+ cut also proved troublesome.
The results mean that PEMEX’s heaving debt has grown further to US$107.2 billion.
Quarterly Results Show Mixed Bag for Majors
PEMEX is not the only struggling major. Royal Dutch Shell announced a US$18.1 billion net loss in 2Q20, most of which was accounted for by multi-billion dollar write down of assets made earlier this year following the oil price plunge. Though Shell had originally stated it would write down up to US$22 billion, the company eventually settled on US$17 billion.
“Given the outlook of the macroeconomic and energy market impact of COVID-19, as well as expectations on long term supply and demand fundamentals, we revised our commodity price and margin outlook. This resulted in lower medium and long-term oil and gas prices and a reduction in our refining margin assumptions by about 30 percent on average, compared with our prior assumption of midcycle refining margins,” the company said.
Meanwhile, French energy company Total buffered itself from the worst of the downturn through “very good trading gains,” Bloomberg reported. Total’s net income in 2Q20 ended up being US$126 million despite an US$8.1 billion write down. Bloomberg reported that the results were a 96 percent year-on-year loss, but still far better than “the average loss of $443 million expected by analysts.”
This week, CNH approved PEMEX’s evaluation plan for Xolotl discovery in the Uchukil block some 21km from the Port of Dos Bocas. The plan will require an investment of US$21 million and will provide further insight into the viability of the reserve to uncover some of its geophysical and geological complexities ahead of a potential production plan. The discovery was originally made with the Xolotl-1EXP well and in the plan, two delineation wells will be completed. PEMEX states that it will utilize existent infrastructure in the nearby Xanab field during its project.