PEMEX Looks for Options to Pay Off Debt

Since PEMEX has to pay off US$6 billion of debt in 1Q23, the company is on the lookout for options to gain liquidity. Despite the government's support for debt payments, it has not announced support to help the NOC pay the next amortizations.

According to Bloomberg News, PEMEX plans to issue US$2 billion in bonds to pay its due debt for the next few months. The NOC faces debt payments of US$10 billion in 2023. However, the value of PEMEX’s bonds fell due to investor speculation amid growing pressure for the NOC to try and liquefy assets.

On the back of these developments, PEMEX bonds that expire in 2041 performed poorly. According to experts, the state-owned company’s lack of government backup is concerning. Moreover, PEMEX’s budget did not consider the debt payments due for 2023 and a similar PEMEX move in June 2022 performed poorly due to low demand.

The NOC’s strategic decisions have attracted critique as well. Experts continue to criticize the direction of the refining policy, which has proved to be costly and has been accused of being ineffective. According to Francisco Monaldi, Director of the Latin American Energy Program, the Baker Institute in Houston, refining should not be the main focus of a state-owned oil company, especially in Latin America, where refining has never been a boon to NOCs.

Furthermore, Mexico has continued to foster uncertainty in the energy sector. “It is really incredible that a country that is one of the hydrocarbon giants in the region, that has tons of advantages in terms of location and human resources, is next to the US and could take advantage of the development of shale-based natural gas is simply not on the investors' map. Nobody is talking about Mexico [regarding oil investments],” said Monaldi to El País.

While PEMEX was able to pay off parts of its massive debt in 2022 due to high oil prices, it appears that the government expects the company to continue paying its debt. Earlier this year, President Andrés Manuel López Obrador declared that the government would help the NOC to pay its debt if needed. PEMEX CEO Octavio Romero Oropeza subsequently said that the company was negotiating with the Ministry of Finance to obtain support for the 1Q23  payments. However, the government has not reported any actions to help the company. Nevertheless, PEMEX may yet receive a capital injection or a delay in its tax payments to free some cash for the company.