PEMEX at Center of Risk Matrix

You can watch the video of this panel discussion here.

Without a doubt, 2020 has been a year characterized by simultaneous disruptions and uncertainties in the energy sector. Therefore, it is important to know how Mexican oil and gas companies can better stabilize the ground they walk on. Day 2 of Mexico Oil & Gas Summit hosted a panel discussion titled “Minimizing Financial, Legal and Operational Risk in the New Normal.” The panel was moderated by Gonzalo Monroy, Managing Director of GMEC. In his introductory remarks, Monroy said the subject of risk connected to PEMEX had to be dealt with.

Panelist Ixchel Castro, Americas Market Lead at Wood Mackenzie, focused her remarks on the balance between the turmoil in the international energy market and the opportunities that Mexico has regarding its oil and gas resources. “Project financing is at risk worldwide; this challenge is not exclusive to Mexico. The financial health of the sector is deteriorating and we will see more M&As. Mexico’s potential is unique. Learning one’s strengths instead of trying to overachieve and underdeliver is crucial,” said Castro.

Victor Escalante, CFO at Constructora y Perforadora Latina, is considered one of PEMEX’s foremost drilling partners. Escalante was careful in his choice of words when he stated that “we need to understand that a dramatic 2Q20 created a hole in companies' cashflows. Based on this, we need to improve communication with our clients.”

Undoubtedly, the panelist that spoke without reservations in regards to the influence PEMEX has had in Mexico’s overall risk landscape was David Enríquez, Senior Partner at Goodrich, Riquelme y Asociados. “If PEMEX and the government do not realize the severity of the situation and how it affects the supply chain, we will see contractors and subcontractors increasingly resort to litigation. Distress financing and more shareholder equity is part of the new normal, as traditional credit and business as usual do not apply,” said Enríquez.

In the midst of this high-stakes discussion, it was panelist Marco Antonio de la Peña, Partner at Cuatrecasas, who offered the most balanced perspective when he said that “project financing, along with M&As, are interesting alternatives to solve the financial problems of some groups. However, private investments and capital funds will have to step up and fill other gaps.”