PEMEX, Mexican Oil Field Service Industry Stand at the Crossroads

Globally, the oil and gas industry is composed of two major segments. Operators, which are the companies that take on the geological risk of hydrocarbon exploitation. Operators include IOCs (International Oil Companies), such as Exxon, BP, Chevron, Shell, and NOCs (National Oil Companies), such as Petróleos Mexicanos (PEMEX) and Petrobras (Petrobras is partially owned by the Brazilian government); and service companies (oil-field service companies), which represent a very important portion of the industry, as they are responsible for carrying out the necessary work for the development and exploitation of oil fields. Key players in this segment include SLB, Halliburton, Baker, and Weatherford, as well as companies that own and operate drilling rigs and marine vessels required for offshore operations. This market segment is more fragmented, with many local companies participating. In the case of Mexico, these companies include CARSO, Typhoon, Protexa, Cotemar, Perforadora México, and Perforadora Latina, among others.

In Mexico, there is a great misperception about the role of service companies. In the exploration phase, service companies collect and process the seismic information that is used to find hydrocarbons, drilling contractors perform all tasks that are required to drill a well, including the rig and the drilling services: fluids, logging, specialized tools and packers. Once oil is found, a service company performs a thorough analysis of the properties of the rock. Production facilities, platforms, and pipelines are all built by service companies. In addition, most maintenance works are performed by contractors. The same thing happens all around the world.

PEMEX bears the geological risk, and therefore. it must make the most important decisions: where to drill the well and how to develop the reservoir in order to optimize the value of its asset. It´s a grave responsibility: it's the patrimony of the Mexican people, but it is also a business decision that relates to its own existence in the long term.

All industries in the world recognize the strong bond between the final user and its suppliers. Let's look at the auto industry as an example. The product, market, and design risks are taken by the automakers, but they rely on their suppliers in each step of the process of building a car. They take good care of their suppliers because they consider suppliers as an essential part of their industry. In the case of the Mexican NOC, there is the perception that service companies are corrupt and voracious.

Up until the 2013 Energy Reform, the Constitution only allowed the existence of PEMEX as the sole oil and gas operator, in a monopsony where all national and international service companies operated. PEMEX had become a major hydrocarbon producer, and by 1990 was internationally regarded as a highly reliable company in terms of invoicing and payments, following the implementation of rules ensuring payments were made as contracted, without requiring “facilitating” payments.

Although the monopsony ended with the Constitutional Reform, PEMEX remains by far the main buyer of oil-field services, with investment levels maintained at around US$15 billion annually. In 2017, the company faced severe budget constraints, and invoicing began to be delayed, but it was not until 2019 that, due to financial, budgetary, and administrative reasons, the payment and invoice acceptance system began to show serious deficiencies. Refining losses affected working capital requirements, and for the first time in PEMEX's history, the federal government began capitalizing the company, whose equity was at that time negative by over US$100 billion. The government directive was to avoid increasing PEMEX’s debt levels.

In April 2020, PEMEX lost its investment-grade rating, when the credit rating agency Moody’s downgraded its credit rating to “Ba2”. The cost of PEMEX’s financial debt rose to twice that of the federal government’s.

By 2023, international markets' perception of PEMEX as a client in the oil-field services industry had radically changed. Not only were there significant delays in payments, but also in the invoicing process for completed work. This latter process involves assigning a code known as COPADE to the invoice submitted by the contractor, certifying that the invoice has been recognized as a payment obligation, and recorded under the line item: "Suppliers" in PEMEX’s accounting. As of 2Q25, PEMEX's balance sheet shows a recognized payable to suppliers of close to US$23 billion, while unrecognized work (without COPADE) could total at least another US$20 billion.

There is a factoring platform at Nacional Financiera (Nafin), which has been operating for several years, known as “Cadenas Productivas,” which provided service companies with a financing alternative for COPADE-approved invoices. Through this platform, both Nafin and Mexican banks directly purchase contractors' invoices. However, their capacity to take on “PEMEX risk” has now reached its limit for both Nafin and the banks, so the platform currently operates at very limited volumes.

At the initiative of international institutions like Citi and Deutsche Bank, certain actions have been taken to pay the invoices of PEMEX’s largest contractors, including the issuance of Credit Default Swaps (CDS) and the June 2024 issuance of a US$2 billion PEMEX bond, earmarked for the payment of large contractor invoices.

The delay in payment and/or invoice recognition is having an impact on service companies’ ability to continue operations efficiently, further exacerbated by a significant reduction in investment levels for 2025. One indicator of sector activity is the number of drilling rigs, both onshore and offshore, which fell from 57 rigs in January 2024 to 24 rigs in 2025 — a 58% decrease.

In 2025, there have been virtually no payments to service companies, some of which — such as SLB and CARSO — already hold overdue invoices totaling close to US$1 billion. It can be said that the industry is paralyzed.

The Mexican government has recently taken two major steps: 

1. The issuance of Pre-Capitalized Notes for US$12 billion that will be devoted to the payment of financial and commercial debt; and 

2. The announcement of a Trust at Banobras, a Mexican development bank, for more than US$12 billion, with the objective of financing new private investment and paying invoices due to service companies.

In both cases, there is a contingent guarantee from the Mexican government. 

No announcement has been made yet as to how much of these amounts will be used to pay invoices due to service companies, but the decision will reflect the understanding by the Mexican government and PEMEX of the strong bond between PEMEX and its service companies, and the very dire situation that these companies are facing today. The oil-field service industry has a long tradition of standing by PEMEX, and it is an economic sector of great importance, intertwined with other relevant sectors of the economy.

Any long-term solution to PEMEX's financial troubles requires the PEMEX treasury to be capable of immediately facing its commitments with the oil-field service industry, because the industry is one and the same with the Mexican oil and gas industry.