PEMEX Financial Losses at Pandemic Levels

PEMEX reported significant financial losses in its refining business and decreased profits in its most lucrative segment, exploration and production. Yet, ahead of a CEO change and with increasing explicit federal support, the NOC does not plan to return to bond markets to finance its debt.

The company posted a second-quarter loss of approximately MX$255.9 billion (US$14 billion), contrasting its MX$25.4 billion profit for the same period last year. This marks the NOC’s steepest loss since 1Q20, when the pandemic led most oil companies to reduce their profits and drove oil prices to unprecedented negative levels. 

According to IMCO, despite receiving support amounting to MX$165.6 billion, PEMEX ended the first half of 2024 in red, with losses totaling MX$251.3 billion. PEMEX Industrial Transformation reported the worst performance among its subsidiaries, with losses of MX$261.7 billion. The company’s debt to suppliers and contractors reached MX$362.5 million, a 56.8% increase compared to the same period in 2023.

The losses were primarily attributed to the recent weakening of the Mexican peso, according to Carlos Cortez, CFO, PEMEX. Despite these challenges, PEMEX is not considering a return to capital markets to help cover debt payments. CEO Octavio Romero Oropeza emphasized that the current administration has improved the state-owned company's "fragile financial condition," ensuring a "solid starting platform" for the next administration.

President-elect Claudia Sheinbaum has promised to maintain oil production at around 1.8MMb/d in the coming years, leveraging renewable energy sources to meet Mexico’s growing electricity demand. Her goals include enhancing refinery efficiency, reducing fuel imports, and expanding PEMEX’s mandate to include new ventures such as lithium extraction and electric-vehicle infrastructure. She has also pledged to continue the current president's policy of state support for the oil producer. Since taking office, President López Obrador has provided PEMEX with approximately MX$1.37 trillion in cash injections and tax breaks.

Looking ahead, the next administration, led by the ruling party MORENA, plans to bolster support for both PEMEX and the CFE. Sheinbaum’s upcoming reforms include dissolving autonomous bodies like CNH and CRE. Additionally, she announced that PEMEX and CFE would be reclassified from "productive" to "public" enterprises and integrated into a new government ministry.