Moody's Investors Services reaffirmed PEMEX's B1 rating. However, the outlook for the NOC’s base credit risk assessment has been changed to negative, signaling potential challenges ahead. Moody’s decision takes into account the strong correlation of default between the state-owned company and the Mexican government (Baa2 stable), assuming high government support if needed.
The firm justified its decision by highlighting the absence of fundamental changes in PEMEX's business strategy. The downgrade is a result of concerns over increasing credit risks caused by the company's struggles to raise capital investments and improve its financial and operational performance. Consequently, this situation poses potential liquidity challenges for PEMEX in the future.
Moody's expects substantial federal support for PEMEX throughout 2023 and 2024, but warns that such support may become unsustainable if there is no significant change in the company's business model. This is primarily due to the likelihood of reduced fiscal space in the upcoming years, limiting the government's ability to provide support at levels similar to those observed during the previous administration of Andrés Manuel López Obrador.
Factors that could potentially trigger further downgrades in PEMEX's rating include a decline in production and reserves over the medium term and deterioration in operational performance resulting from insufficient maintenance investments. Additionally, an escalation in debt due to increased cash flow issues could also contribute to the downgrade.
Moody's suggests that PEMEX could regain a stable outlook if the company implements a strategy to enhance its financial and operational performance. Taking decisive measures to address the identified challenges and demonstrating improved stability will be crucial for restoring confidence in PEMEX's creditworthiness.
Meanwhile, President Andrés Manuel López Obrador said that credit rating grades do not impact the company, despite the negative outlook. In his morning conference, López Obrador said that Moody’s and Fitch Ratings’ grades do not affect the NOC, arguing that these companies are part of a “simulation” driven by economic “interests,” discrediting the companies’ analysis. López Obrador said that the important thing to consider is that PEMEX’s debt has decreased. However, PEMEX has faced great difficulty to pay its providers; it owes its contractors nearly US$15 billion – a sum that has more than doubled in four years. On the back of these delays, a shadow industry has developed where people claim to be close to the company and who can expedite payments in exchange for a percentage of the overdue amount. Experts assert this as a sign of the worsening state of the finances in the company.
Fitch Ratings also downgraded PEMEX's credit rating and ESG score, citing weak operating performance and upcoming debt maturities in 2023. This downgrade is expected to limit PEMEX's access to additional credit and concessions, placing further strain on its liquidity.