PEMEX Nearly Doubles Losses in 2019By Cas Biekmann | Fri, 02/28/2020 - 12:56
In a statement filed with the Mexican Stock Exchange, the NOC reported dismal results: a US$18.3 billion net loss for 2019. Despite President López Obrador’s pursuit to revitalize PEMEX, the loss has nearly doubled compared to 2018.
The president announced in late 2018 that he aimed to increase PEMEX’s oil output, fighting to reverse a 15-year decline on this front. The pledge was accompanied by major capital flows, as well as a plan to reduce the NOC’s crippling debt structure. Nonetheless, oil production did not increase in 2019. 4Q19 proved to be especially troublesome for PEMEX, as it reports a US$9 billion loss, which represents nearly half of the entire year’s losses. With total financial debt at US$105.2 billion last year, a mere 0.6 percent lower than at the end of 2018, the company remains the world’s most indebted oil company. PEMEX’s deteriorating finances will prove to be yet another major hurdle to overcome for López Obrador, who aims to make Mexico self-sufficient in terms of energy.
PEMEX received its share of warnings from credit rating agencies in 2019. Suspending new licensing rounds and focusing on a new multi-billion-dollar refining project in Dos Bocas proved to be controversial. As a result, Fitch Ratings downgraded PEMEX bonds to junk status. Others, such as Moody’s, remain critical as well. The refining output is equally worrying: in 4Q19, PEMEX struggled to boost refining in its six existing refineries. Although PEMEX refined more than in the 4Q18, 4Q19 had already dropped compared to earlier on in the year.
Nonetheless, CFO Alberto Velázquez toned down the negative perceptions in a conference call with analysts. Velázquez argues that PEMEX did manage to halt the production decline that has long plagued the company, which puts it in the right direction to improve on its financial situation. This argument, he says, is supported by more spending on E&P, which will pay off in the future, as well as a remarkable decrease in fuel theft. Related to exploration, Velázquez promised to provide more insight on proven reserves to quell unrest: an increase of 7.818Bboe compared to 7Bboe in 2018 proves that spending is beginning to show positive effects. Nonetheless, crude oil production in 2019 hit an average of 1.68MMb/d, a drop of 7 percent compared to 2018, and even less than half of the production in 2004.
Although Mexico’s energy reform has not yet benefitted PEMEX, CFE did end the year on a positive note: it managed to increase its net profits by 16 percent over 2019. The company led by Manuel Bartlett filed an extra profit of MX$6.6 billion (US$333 million) compared to profits in 2018.