PEMEX Plans to Refinance its Debt

PEMEX is in conversation with the government to gain financial support so it can refinance its debt in 1Q23. The government oversaw some of the NOC’s debt recently but stopped doing so when the global price of oil skyrocketed. According to Octavio Romero, CEO, PEMEX, the NOC has maintained its debt payments. 

According to Reuters, the payment due for 1Q23 amounts to US$4 billion while the company’s total payments are US$7.5 billion for 2023 and US$8.9 billion for 2024. As of 3Q22, PEMEX’s debt stands at US$105 billion. The company has received government support such as capital injections and reductions on federal utility sharing rights. Despite a 56.5 percent year-on-year rise in its revenue, the NOC reported an MX$52 billion (US$2.6 billion) net loss in 1Q22. Romero assured PEMEX will close 2022 with revenue and production of 1.9MMb/d. The oil company will then reach 2MMb/d in 2023.

PEMEX is the most indebted oil company in the world and is listed on the Mexican Stock Exchange (BMV). According to El Economista, almost 20 percent of the total long-term debt issued by the BMV is from five state-owned companies: PEMEX, CFE, FOVISSSTE, FIRA and CMIC. By November 2022, CFE and PEMEX’s debt at the BMV amounted to MX$238 billion (US$12.04 billion). Experts estimate that the two companies, besides being the most indebted, also require the most financial support. “This is not healthy because it implies that the government will have to channel more resources to pay off the debt and to eventually support other state companies,” said Carlos González, Director of Analysis, Monex Casa de Bolsa.

Moody’s Investors Service recently downgraded PEMEX’s credit rating based on its economic prospects due to a negative debt record and economic outlook.

Moody’s downgrade for PEMEX may mean that the oil company will need to depend further on the government to decrease its debt. According to Reuters, this downgrade is expected to increase financing costs for PEMEX. The news is added to persistent warnings over policies that have created uncertainty for investors and conflict with its USMCA neighbors.

Despite Mexico’s sturdy finances, PEMEX’s debt is still a cause of concern. “PEMEX’s problems, such as declining output and a worrisome debt burden, will continue in the medium to long term because of the lack of structural reforms. But in the meantime, with the Mexican crude mix riding high, averaging above US$80/b, it is safe to affirm that the state-owned oil firm will have a good year in terms of revenues,” said Alejandro Valerio, Practice Leader, FrontierView.