PEMEX an Economic Burden for the Country: HR Rating

HR Ratings reported PEMEX’s results for 3Q20 show an increase in its financial deficit. As a result, the company has become a net loss for Mexico, says the firm.

The deterioration of the company’s financial situation follows a decrease in its sales prices and sales volumes, according to the agency. The NOC struggles with a financial debt of US$110.3 billion due to a 32 percent decrease in sales, a reduction of 41 percent in domestic sales and an 18.6 percent decrease in exports, reported MBN.

PEMEX’s net debt ceiling for this year stands at MX$10 billion (US$500 million) and US$1.25 billion. HR Ratings said it is likely that this debt ceiling will be greater as the deficit increases, reported Forbes.   

Last week, PEMEX wanted Banxico to use a portion of its international reserves to pay off the oil debt. However, Banxico considers that the loan proposal is not feasible, according to the bank’s laws. In addition, PEMEX bonds are not considered ‘safe’, because the company does not have the requirements and conditions needed for a Banxico investment, reported MBN.

HR Ratings reported that in 3Q20, the company’s financial deficit reached MX$219.9 billion (US$10.9 billion), which is higher than the total losses of MX$82.7 billion (US$4 billion) in the 3Q19. In addition, from July to September, PEMEX’s gross sales were MX$571 billion (US$28.2 billion), which means that sales decreased by MX$111.7 billion (US$5.5 billion) compared to 3Q19.

The agency said that the financial deficit is related to the fiscal policy of the federal government, the macroeconomic environment and a weakened position in the national market. This decrease in sales was compensated by a tax reduction of MX$67.1 billion (US$3.3 billion) and by an increase in profits, mainly due to government transfers totaling MX$113.9 billion (US$5.6 billion).

HR Ratings said the debt denominated in pesos increased by MX$30.5 billion (US$1.51 billion) while the company’s liquidity suffered a reduction of MX$23.8 billion (US$1.18 billion). The agency said it is expecting higher levels in its debt due to the current conditions of the industry and the needs of the company during the pandemic.

At Mexico Oil and Gas Summit 2020, David Enríquez, Senior Partner at Goodrich, Riquelme y Asociados, said if PEMEX and the Mexican government do not accept the severity of the situation and how it affects the supply chain, litigations will worsen, reported MBN.

Manuel Rodríguez González, President of the Energy Commission in the Chamber of Deputies, said that in 2021 PEMEX will receive a substantial budget as a result of increased production, which aims to contribute to 5.18 percent of Mexico’s GDP. The NOC wants to produce over 1.94MMb/d in 2021. Nonetheless, the impact of the pandemic remains uncertain, reported MBN.

HR Ratings said that even if demand returns to pre-pandemic levels, PEMEX’s recovery will depend on recovering some markets the company has transferred to individuals and privates. The agency said PEMEX’s future depends on its ability to become competitive at the international level against other international refineries.