Moody’s Sees Risk for PEMEX With New Government Strategies

Moody’s has identified significant credit risk for PEMEX under the new administration of Claudia Sheinbaum, highlighting two potential scenarios. In its recent report, the rating agency emphasizes the financial challenges faced by the state oil company, suggesting that continued government support will continue to be crucial to address PEMEX's debt obligations and liquidity needs.

In the first scenario, PEMEX and the government maintain their current strategy focused on energy sovereignty through refining and marketing. The second scenario involves PEMEX refinancing its debt in 2025 with government assistance. While this approach would significantly improve PEMEX's liquidity, Moody’s cautions that the company would still generate negative free cash flow. This, in turn, would heighten the risk of a forced debt exchange, potentially leading to losses for investors, "Although this strategy would significantly improve PEMEX's liquidity, the company will continue to generate negative free cash flow, increasing the risk of a forced debt exchange if there are losses for investors."

Moody’s identifies the primary credit risks for PEMEX as financial, particularly regarding how the company will manage its increasing debt obligations in 2026-2027. "PEMEX's strategy will determine the extent to which it can reduce its liquidity needs, decrease its reliance on government support, and mitigate the risk of a forced debt exchange. We consider forced debt exchanges a form of default," states the firm.

Supporting PEMEX is becoming increasingly costly for the government. Moody’s forecasts that the need for government support will double by 2026 compared to 2019-2023 levels, due to significant debt maturities and continuous negative free cash flows. "PEMEX's debt stood at approximately US$97.3 billion in September 2024. Given its current business strategy, the company would need substantial and ongoing government support to meet its liquidity needs each year."

By 2026, PEMEX will require around US$17.4 billion from the government to continue its current policy centered on refining, according to Moody’s.

In response to these challenges, PEMEX, recently announced an austerity program under the new presidency of Claudia Sheinbaum. This initiative aims to save MX$50 billion (US$1.031 billion) and implement a new simplified tax regime. Named the “Oil Right for Well-Being,” this strategy aims to simplify PEMEX’s fiscal obligations and enhance its operational efficiency. Under presidential instructions, the existing three oil contributions from five fiscal regions (Exploration, Hydrocarbon Extraction, and Shared Utility - DUC) will be consolidated into a single “Oil Right for Welfare” with two fiscal regions. This consolidation is designed to streamline taxation and leverage PEMEX’s productive capabilities, as previously reported by MBN.